Buckle Inc. Ari Lazar | Bi (Brian) Ge | Cindy Anggraini | Siwei (Lerissa) Li April 28th, 2016 RCMP – Spring 2016

AGENDA Introduction Company Overview Macro-Economic Analysis Financial Analysis Projection & Valuation Recommendation

INTRODUCTION

Screening Process The Buckle Inc. Sector Exposure in Portfolio Simple Business Model Profit Margin >10% ROE >10% Market Cap <4bn Low Debt- to-Assets Ratio

Market Information Key InfoDescription NameBuckle Inc. TickerBKE IndustryServices Sub-sectorApparel Stores Key InfoDescription Current Price$ as of April 26, 2016 Market Cap$ 1.48 bn P/E9.67 as of April 26, 2016 Beta0.999 Source: Yahoo Finance

COMPANY PROFILE

Company History Began as Mills Clothing in Kearney, Nebraska Women’s clothing introduced in first mall- based location Name changed to Buckle. Inc. Went Public on NASDAQ; 100 stores in 18 states Moved to NYSE, trading as BKE Reached 400 stores in 41 states; Revenue of nearly $900M

Business Overview Medium-to-Upper priced casual apparel Target: years Men and Women 468 stores in 44 states Net sales of $1.2 bn in 2015 Products: Branded and private brands

Brands: Men

Brands: Women

Management Daniel Hirschfeld –Chairman of Buckle. Inc. –Son of David H. who founded Buckle. Inc. Dennis H. Nelson –CEO of Buckle. Inc. –Has been with Buckle since 1970 –Worked in all phases of operations

Revenue Breakdown Source: 10-K

SWOT ANALYSIS Strength: Strong Brand Image Wide Selection Flexible Shelving Constant Margins Strength: Strong Brand Image Wide Selection Flexible Shelving Constant Margins Opportunities Coming back to Fashion Development of Own Brand New strategic locations Opportunities Coming back to Fashion Development of Own Brand New strategic locations Weaknesses Out of Fashion Online Sales Weaknesses Out of Fashion Online Sales Threats Slow growth in target age group Shrinking Disposable Income Threats Slow growth in target age group Shrinking Disposable Income

MACROECONOMIC ANALYSIS

US Retail Sales – Clothing Sales Source: Census Bureau Statistics, FRED

Consumer Sentiment Source: FRED, National Cotton Council

Porter-5 Forces: Apparel Industry Threat of New Entrants Threat of Substitutes Supplier Bargaining Power Buyer Bargaining Power Rivalry APPAREL INDUSTRY Moderate Low High Threat of New Entrants: Ease of setting up new clothing companies Fashion flexibility Threat of Substitutes: Dominant players in market Plenty of choices Supplier Bargaining Power: Lots of suppliers Easy for business to switch Buyer Bargaining Power: Buyer preference and taste Rivalry: Some competitors have economies of scale and strong influence over retailers. High

FINANCIAL ANALYSIS

Liquidity & Profitability Ratios Source: 10-K, Group Calculation

Profitability Ratios (Part 2) Source: 10-K, Group Calculation

Activity Ratios Source: 10-K, Group Calculation

Dupont Analysis: ROE Ratio Source: 10-K, Group Calculation

Greenblatt Ratios Source: 10-K, Group Calculation

PROJECTION & VALUATION

Revenue Breakdown The average sales per store Same Store Sales Number of Stores Store Adjustment on new stores Sales of non new stores In-Stores Sales Expected to increase in the future Online Sales In Stores Sales Online Sales Revenue Source: 10-K, Group Calculation

Income Statement Projections Source: 10-K, Group Calculation

Other Projections Source: 10-K, Group Calculation

Discount Rate Source: Yahoo & Google Finance

Valuation: DCF

Comparable Company Description CompanyExpress Inc. The Cato Corporation Urban Outfitters Inc. Francesca's Holdings Corporation DSW Inc. TickerEXPRCATOURBNFRANDSW Business Description Specialty apparel and accessories retailer Specialty retailer of fashion apparel and accessories in the Southeastern United States. A lifestyle specialty retail company, engages in the retail and wholesale of general consumer products A chain of retail boutiques offering fashion apparel, jewelry, accessories, and gifts primarily for women between the ages of 18 and 35 A branded footwear and accessories retailer Source: Capital IQ

Comparable Company Ratios Source: Capital IQ, Group Calculation

Comparable Company Valuation Source: Capital IQ, Group Calculation

Implied Valuation Source: yahoo finance, Group Calculation DCF $32.85 COMP $34.97 WEIGHT Equally TOTAL PRICE $33.91 Current Price: $ as per April 26, 2016

Technical Analysis “The last 5 years performance, the stock price declines and SMA 20 crosses down SMA 200”

RECOMMENDATION

Recommendation Industry Unfavorable current industry performance Weak consumer spending Company Margins are still high Growth of revenue is in downward trend Valuation Under-valued price for DCF and comparable Unfavorable pattern for technical Lower share price expectation Watchlist In conclusion: Undervalued stock does not necessarily lead to a “Buy” recommendation. Pay attention to the momentum of the industry.

Thank you!