Temporary working capital

BUCKLE INC MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto of the Company included in this Form
10-K. The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial condition and
results of operations during the periods included in the accompanying
consolidated financial statements included in this Form 10-K.

EXECUTIVE OVERVIEW

The company’s management considers the following as key performance indicators to assess the performance of the company.

Comparable Store Sales - Stores are deemed to be comparable stores if they were
open in the prior year on the first day of the fiscal period being presented.
Stores which have been remodeled, expanded, and/or relocated, but would
otherwise be included as comparable stores, are not excluded from the comparable
store sales calculation. Online sales are included in comparable store sales.
Management considers comparable store sales to be an important indicator of
current Company performance, helping leverage certain fixed costs when results
are positive. Negative comparable store sales results could reduce net sales and
have a negative impact on operating leverage, thus reducing net earnings.

Net Merchandise Margins - Management evaluates the components of merchandise
margin including initial markup and the amount of markdowns during a period. Any
inability to obtain acceptable levels of initial markups or any significant
increase in the Company's use of markdowns could have an adverse effect on the
Company's gross margin and results of operations.

Operating Margin - Operating margin is a good indicator for management of the
Company's success. Operating margin can be positively or negatively affected by
comparable store sales, merchandise margins, occupancy costs, and the Company's
ability to control operating costs.

Cash Flow and Liquidity (working capital) - Management reviews current cash and
short-term investments along with cash flow from operating, investing, and
financing activities to determine the Company's short-term cash needs for
operations and expansion. The Company believes that existing cash, short-term
investments, and cash flow from operations will be sufficient to fund current
and long-term anticipated capital expenditures and working capital requirements
for the next several years.

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RESULTS OF OPERATIONS

The following table sets forth certain financial data expressed as a percentage
of net sales and the percentage change in the dollar amount of such items
compared to the prior period:

                                                                 Percentage of Net Sales                                           Percentage Increase
                                                                 For Fiscal Years Ended                                                (Decrease)
                                            January 29,              January 30,                February 1,            Fiscal Year 2020 to       Fiscal Year 2019
                                               2022                      2021                       2020                      2021                    to 2020

Net sales                                         100.0  %                   100.0  %                   100.0  %                   43.6  %                  0.1  %
Cost of sales (including buying,
distribution, and occupancy costs)                 49.6  %                    55.5  %                    58.1  %                   28.2  %                 (4.2) %
Gross profit                                       50.4  %                    44.5  %                    41.9  %                   63.0  %                  6.1  %
Selling expenses                                   20.6  %                    21.2  %                    22.7  %                   39.4  %                 (6.5) %
General and administrative expenses                 3.9  %                     4.6  %                     4.6  %                   23.1  %                    -  %
Income from operations                             25.9  %                    18.7  %                    14.6  %                   99.7  %                 27.8  %
Other income, net                                   0.2  %                     0.3  %                     0.7  %                  (22.9) %                (52.9) %
Income before income taxes                         26.1  %                    19.0  %                    15.3  %                   97.6  %                 24.1  %
Income tax expense                                  6.4  %                     4.6  %                     3.7  %                  103.2  %                 22.6  %
Net income                                         19.7  %                    14.4  %                    11.6  %                   95.8  %                 24.6  %


Fiscal 2021 vs. Fiscal 2020

Results for the 52-week period ended January 30, 2021 were significantly impacted by the company’s closure of all physical stores due to the onset of the COVID-19 pandemic March 18, 2020.

Net sales for the 52-week fiscal year ended January 29, 2022, increased 43.6% to
$1.295 billion from net sales of $901.3 million for the 52-week fiscal year
ended January 30, 2021. Comparable store net sales for the 52-week fiscal year
increased 43.8% from comparable store net sales for the prior year 52-week
period ended January 30, 2021. Total sales growth for the year was the result of
a 43.5% increase in the number of transactions and a 2.0% increase in the
average unit retail, partially offset by a 1.9% decrease in the average number
of units sold per transaction. Online sales for the fiscal year increased 15.9%
to $220.8 million for the 52-week fiscal year ended January 29, 2022 compared to
$190.6 million for the 52-week fiscal year ended January 30, 2021. Average sales
per square foot for fiscal 2021 increased 50.6% from $311 to $468. Total square
footage as of January 29, 2022 was 2.292 million compared to 2.301 million as of
January 30, 2021.

The Company's average retail price per piece of merchandise sold increased
$0.93, or 2.0%, during fiscal 2021 compared to fiscal 2020. This $0.93 increase
was primarily attributable to the following changes (with their corresponding
effect on the overall average price per piece): a 3.9% increase in average knit
shirt price points ($0.40), a 9.0% increase in average accessory price points
($0.36), an increase in average price points for certain other merchandise
categories ($0.20), and a shift in the merchandise mix ($0.30); which were
partially offset by a 1.8% decrease in average denim price points (-$0.33).
These changes are primarily a reflection of merchandise shifts in terms of
brands and product styles, fabrics, details, and finishes.

Gross profit after buying, distribution, and occupancy costs increased from
$400.7 million in fiscal 2020 to $653.0 million in fiscal 2021. As a percentage
of net sales, gross profit was 50.4% in fiscal 2021 compared to 44.5% in fiscal
2020. The gross margin increase was the result of leveraged occupancy, buying,
and distribution expenses (5.05%, as a percentage of net sales) and an
improvement in merchandise margins (0.85%, as a percentage of net sales).
Merchandise shrinkage was 0.3% of net sales for fiscal 2021 compared to 0.4% of
net sales for fiscal 2020.

Selling expenses increased from $191.2 million in fiscal 2020 to $266.4 million
in fiscal 2021. As a percentage of net sales, selling expenses decreased from
21.2% in fiscal 2020 to 20.6% in fiscal 2021.

General and administrative expenses increased from $41.5 million in fiscal 2020
to $51.1 million in fiscal 2021. As a percentage of net sales, general and
administrative expenses decreased from 4.6% in fiscal 2020 to 3.9% in fiscal
2021.

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In total, selling, general, and administrative expenses were 24.5% of net sales
for fiscal 2021 compared to 25.8% of net sales for fiscal 2020. The decrease was
the result of a decrease in store labor-related expenses (1.15%, as a percentage
of net sales) and sales leverage across several other expense categories (1.30%,
as a percentage of net sales), which were partially offset by an increase in
expense related to incentive compensation accruals (1.15%, as a percentage of
net sales).

As a result of the above changes, the Company's income from operations increased
from $168.0 million for fiscal 2020 to $335.5 million for fiscal 2021. Income
from operations was 25.9% as a percentage of net sales in fiscal 2021 compared
to 18.7% as a percentage of net sales in fiscal 2020.

Other income was $2.3 million in fiscal 2021 compared to $2.9 million in fiscal
2020. The Company's other income is derived primarily from investment income
related to the Company's cash and investments.

Income tax expense as a percentage of pre-tax income was 24.6% in fiscal 2021
and 23.9% in fiscal 2020, bringing net income to $254.8 million in fiscal 2021
versus $130.1 million in fiscal 2020.

Fiscal 2020 vs. Fiscal 2019

A discussion of fiscal 2019 and year-over-year comparisons between fiscal 2020
and fiscal 2019 can be found in PART II, ITEM 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in our Annual Report
on Form 10-K for the fiscal year ended January 30, 2021, filed with the United
States Securities and Exchange Commission on March 31, 2021.

CASH AND CAPITAL RESOURCES

As of January 29, 2022, the Company had working capital of $142.7 million,
including $254.0 million of cash and cash equivalents and $12.9 million of
short-term investments. The Company's cash receipts are generated from retail
sales and from investment income, and the Company's primary ongoing cash
requirements are for inventory, payroll, occupancy costs, dividend payments, new
store expansion, remodeling, and other capital expenditures. Historically, the
Company's primary source of working capital has been cash flow from operations.
During fiscal 2021, 2020, and 2019 the Company's cash flow from operations was
$311.8 million, $227.4 million, and $130.7 million, respectively. Changes in
operating cash flow between each of the three years is primarily a function of
changes in net income, along with changes in inventory and accounts payable
based on the timing and amount of merchandise purchased in each respective
period. Operating cash flow is also impacted by the timing of certain other
payments, including rent and income taxes. The Company's growth in operating
cash flow for fiscal 2021 compared to both fiscal 2020 and fiscal 2019 is
attributable to the strong increase in both net sales and net income for the
year.

During fiscal 2021, 2020, and 2019, the Company invested $18.3 million, $5.5
million, and $6.4 million, respectively, in new store construction, store
renovation, and store technology upgrades. The Company spent $0.8 million, $2.2
million, and $0.9 million in fiscal 2021, 2020, and 2019, respectively, in
capital expenditures for the corporate offices and distribution facility.

During fiscal 2022, the Company anticipates opening 5 new stores and completing
approximately 15-20 store remodels and/or relocations. Management estimates that
total capital expenditures during fiscal 2022 will be approximately $22.0 to
$27.0 million, which includes primarily planned store projects and technology
investments. The Company believes that existing cash and cash equivalents,
investments, and cash flow from operations will be sufficient to fund current
and long-term anticipated capital expenditures and working capital requirements
for the next several years. The Company has had a consistent record of
generating positive cash flow each year and, as of January 29, 2022, had total
cash and investments of $286.2 million, including $19.4 million of long-term
investments.

However, future conditions may reduce the availability of funds depending on factors such as a decline in demand for the Company’s product, a change in product mix, competitive factors and general economic conditions as well as other risks and uncertainties that would reduce the Company’s sales. , net profitability and cash flow. In addition, the acceleration of the Company’s store openings and/or renovations, or the completion of a merger, acquisition or other financial transaction could reduce the amount of cash available for other expenses. fixed assets and working capital requirements.

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The Company has available an unsecured line of credit of $25.0 million with
Wells Fargo Bank, N.A. for operating needs and letters of credit. The line of
credit agreement has an expiration date of July 31, 2023 and provides that $10.0
million of the $25.0 million line is available for letters of credit. Borrowings
under the line of credit provide for interest to be paid at a rate based on
SOFR. The Company has, from time to time, borrowed against these lines of
credit. There were no borrowings during fiscal 2021, 2020, and 2019. The Company
had no bank borrowings as of January 29, 2022 and was in compliance with the
terms and conditions of the line of credit agreement.

Dividend payments - During fiscal 2021, the Company paid total cash dividends of
$347.8 million as follows: $0.33 per share in each of the first three quarters,
$0.35 per share in the fourth quarter, and a special cash dividend of $5.65 per
share in the fourth quarter. During fiscal 2020, the Company's Board of
Directors suspended the Company's quarterly cash dividends during the first two
quarters of the fiscal year as a result of the global COVID-19 pandemic. During
the last two quarters of the fiscal year, the Company paid total cash dividends
of $128.5 million as follows: $0.30 per share in both the third and fourth
quarters and also a special cash dividend of $2.00 per share in the fourth
quarter. During fiscal 2019, the Company paid total cash dividends of $112.9
million as follows: $0.25 per share in each of the first three quarters, $0.30
per share in the fourth quarter, and a special cash dividend of $1.25 per share
in the fourth quarter.

Stock repurchase plan - The Company did not repurchase any shares of its common
stock during fiscal 2021. During fiscal 2020, the Company repurchased 25,000
shares of its common stock at an average price of $14.83 per share. During
fiscal 2019, the Company repurchased 4,552 shares of its common stock at an
average price of $14.92 per share. As of January 29, 2022, 410,655 shares
remained available under the Company's current 1,000,000 share repurchase plan
that was approved by the Board of Directors on November 20, 2008.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations are based upon The Buckle, Inc.'s consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these consolidated
financial statements requires that management make estimates and judgments that
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the financial statement date, and the
reported amounts of sales and expenses during the reporting period. The Company
regularly evaluates its estimates, including those related to inventory,
investments, incentive bonuses, and income taxes. Management bases its estimates
on past experience and on various other factors that are thought to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Management believes that
the estimates and judgments used in preparing these consolidated financial
statements were the most appropriate at that time. Presented below are those
critical accounting policies that management believes require subjective and/or
complex judgments that could potentially affect reported results of operations.

1.Revenue Recognition. Retail store sales are recorded, net of expected returns,
upon the purchase of merchandise by customers. Online sales are recorded, net of
expected returns, when the merchandise is tendered for delivery to the common
carrier. Shipping fees charged to customers are included in revenue and shipping
costs are included in selling expenses. The Company recognizes revenue from
sales made under its layaway program upon delivery of the merchandise to the
customer. Revenue is not recorded when gift cards and gift certificates are
sold, but rather when a card or certificate is redeemed for merchandise. A
current liability for unredeemed gift cards and certificates is recorded at the
time the card or certificate is purchased. The liability recorded for unredeemed
gift certificates and gift cards was $16.5 million and $14.3 million as
of January 29, 2022 and January 30, 2021, respectively. Gift card and gift
certificate breakage is recognized as revenue in proportion to the redemption
pattern of customers by applying an estimated breakage rate. The estimated
breakage rate is based on historical issuance and redemption patterns and is
re-assessed by the Company on a regular basis. Sales tax collected from
customers is excluded from revenue and is included as part of "accrued store
operating expenses" on the Company's consolidated balance sheets.

The Company establishes a liability for estimated merchandise returns, based
upon the historical average sales return percentage, that is recognized at the
transaction value. The Company also recognizes a return asset and a
corresponding adjustment to cost of sales for the Company's right to recover
returned merchandise, which is measured at the estimated carrying value, less
any expected recovery costs. Customer returns could potentially exceed the
historical average, thus reducing future net sales results and potentially
reducing future net earnings. The accrued liability for reserve for sales
returns was $3.0 million as of January 29, 2022 and $2.6 million as of
January 30, 2021.

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The Company's Buckle Rewards program allows participating guests to earn points
for every qualifying purchase, which (after achievement of certain point
thresholds) are redeemable as a discount off a future purchase. Reported revenue
is net of both current period reward redemptions and accruals for estimated
future rewards earned under the Buckle Rewards program. A liability has been
recorded for future rewards based on the Company's estimate of how many earned
points will turn into rewards and ultimately be redeemed prior to expiration. As
of January 29, 2022 and January 30, 2021, $10.6 million and $10.2 million was
included in "accrued store operating expenses" as a liability for estimated
future rewards.

Through partnership with Comenity Bank, the Company offers a private label
credit card ("PLCC"). Prior to October 2020, Customers with a PLCC were enrolled
in our B-Rewards incentive program and earned points for every qualifying
purchase on their card. At the end of each rewards period, customers who
exceeded a minimum point threshold received a reward to be redeemed on a future
purchase. The B-Rewards program also provided other discount and promotional
opportunities to cardholders on a routine basis. Reported revenue was net of
both current period reward redemptions, current period discounts and promotions,
and accruals for estimated future rewards earned under the B-Rewards program. A
liability was recorded for future rewards based on the Company's estimate of how
many earned points would turn into rewards and ultimately be redeemed prior to
expiration, which was included in "gift certificates redeemable" on the
Company's consolidated balance sheets. In October 2020, the Company merged the
B-Rewards program and the Buckle Rewards program enabling participating guests
to earn additional points for qualifying purchases on their PLCC card under the
newly enhanced Buckle Rewards program.

2.Inventory. Inventory is valued at the lower of cost or net realizable value.
Cost is determined using an average cost method that approximates the first-in,
first-out (FIFO) method. Management makes adjustments to inventory and cost of
goods sold, based upon estimates, to account for merchandise obsolescence and
markdowns that could affect net realizable value, based on assumptions using
calculations applied to current inventory levels within each different markdown
level. Management also reviews the levels of inventory in each markdown group
and the overall aging of the inventory versus the estimated future demand for
such product and the current market conditions. Such judgments could vary
significantly from actual results, either favorably or unfavorably, due to
fluctuations in future economic conditions, industry trends, consumer demand,
and the competitive retail environment. Such changes in market conditions could
negatively impact the sale of markdown inventory, causing further markdowns or
inventory obsolescence, resulting in increased cost of goods sold from
write-offs and reducing the Company's net earnings. The adjustment to inventory
for markdowns and/or obsolescence was $5.6 million as of January 29, 2022 and
$10.8 million as of January 30, 2021.

3.Income Taxes. The Company records a deferred tax asset and liability for
expected future tax consequences resulting from temporary differences between
the financial reporting and tax bases of assets and liabilities. The Company
considers future taxable income and ongoing tax planning in assessing the value
of its deferred tax assets. If the Company determines that it is more than
likely that these assets will not be realized, the Company would reduce the
value of these assets to their expected realizable value, thereby decreasing net
income. Estimating the value of these assets is based upon the Company's
judgment. If the Company subsequently determined that the deferred tax assets,
which had been written down, would be realized in the future, such value would
be increased. Adjustment would be made to increase net income in the period such
determination was made.

4.Leases. The Company's lease portfolio is primarily comprised of leases for
retail store locations. The Company also leases certain equipment and corporate
office space. Store leases for new stores typically have an initial term of 10
years, with options to renew for an additional 1 to 5 years. The exercise of
lease renewal options is at the Company's sole discretion and is included in the
lease term for calculations of its right-of-use assets and liabilities when it
is reasonably certain that the Company plans to renew these leases. Certain
store lease agreements include rental payments based on a percentage of retail
sales over contractual levels and others include rental payments adjusted
periodically for inflation. Lease agreements do not contain any residual value
guarantees, material restrictive covenants, or options to purchase the leased
property.

The Company records its lease liabilities at the present value of the lease
payments not yet paid, discounted at the rate of interest that the Company would
have to pay to borrow on a collateralized basis over a similar term. As the
Company's leases do not provide an implicit interest rate, the Company obtains
an incremental borrowing rate based on the information available at commencement
date in determining the present value of lease payments.

The Company has elected to apply the practical expedient to account for lease
components (e.g. fixed payments for rent, insurance, and real estate taxes) and
non-lease components (e.g. fixed payments for common area maintenance) together
as a single component for all underlying asset classes. Additionally, the
Company elected as an accounting policy to exclude short-term leases from the
recognition requirements.

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Consistent with guidance in the FASB Staff Q&A regarding lease concessions
related to the effects of the COVID-19 pandemic, the Company made the election
to treat all lease concessions as though the enforceable rights and obligations
existed in each contract and, therefore, did not apply the lease modification
guidance in ASC 842.

5.Investments. Investments classified as short-term investments include
securities with a maturity of greater than three months and less than one year.
Available-for-sale securities are reported at fair value, with unrealized gains
and losses excluded from earnings and reported as a separate component of
stockholders' equity (net of the effect of income taxes), using the specific
identification method, until they are sold. Held-to-maturity securities are
reported at amortized cost. Trading securities are reported at fair value, with
unrealized gains and losses included in earnings, using the specific
identification method.

OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

As referenced in the table below, the Company has contractual obligations and
commercial commitments that may affect the financial condition of the Company.
Based on management's review of the terms and conditions of its contractual
obligations and commercial commitments, there is no known trend, demand,
commitment, event, or uncertainty that is reasonably likely to occur which would
have a material effect on the Company's financial condition, results of
operations, or cash flows. In addition, the commercial obligations and
commitments made by the Company are customary transactions which are similar to
those of other comparable retail companies.

The following table identifies the material obligations and commitments as of
January 29, 2022:

                                                                        Payments Due by Fiscal Year
Contractual obligations (dollar amounts
in thousands):                              Total               2022            2023-2024          2025-2026           Thereafter

Purchase obligations                     $  16,679          $  13,563       

$2,560 $556 $ – Deferred Compensation

                       19,352                  -                  -                  -               19,352
Operating lease payments (a)               313,794             97,256            132,845             55,646               28,047
Total contractual obligations            $ 349,825          $ 110,819       

$135,405 $56,202 $47,399

(a) See Note D to the consolidated financial statements.

The Company has available an unsecured line of credit of $25.0 million, which is
excluded from the preceding table. The line of credit agreement has an
expiration date of July 31, 2023 and provides that $10.0 million of the $25.0
million line of credit is available for letters of credit. Certain merchandise
purchase orders require that the Company open letters of credit. When the
Company takes possession of the merchandise, it releases payment on the letters
of credit. The amounts of outstanding letters of credit reported reflect the
open letters of credit on merchandise ordered, but not yet received or funded.
The Company believes it has sufficient credit available to open letters of
credit for merchandise purchases. There were no bank borrowings during fiscal
2021, 2020, and 2019. The Company had outstanding letters of credit totaling
$2.7 million and $1.8 million as of January 29, 2022 and January 30, 2021,
respectively. The Company has no other off-balance sheet arrangements.

TRANSACTIONS WITH RELATED PARTIES

Included in other assets is a note receivable of $1.4 million as of January 29,
2022 and $1.4 million as of January 30, 2021, from a life insurance trust fund
controlled by the Company's Chairman. The note was created over three years,
beginning in July 1994, when the Company paid life insurance premiums of $0.2
million each year for the Chairman on a personal policy. The note accrues
interest at 5% of the principal balance per year and is to be paid from the life
insurance proceeds. The note is secured by a life insurance policy on the
Chairman.


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RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Recently issued accounting pronouncements are presented in footnote A to the consolidated financial statements.

FORWARD-LOOKING STATEMENTS

Information in this report, other than historical information, may be considered
to be forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 (the "1995 Act"). Such statements are made in good
faith by the Company pursuant to the safe-harbor provisions of the 1995 Act. In
connection with these safe-harbor provisions, this management's discussion and
analysis contains certain forward-looking statements, which reflect management's
current views and estimates of future economic conditions, Company performance,
and financial results. The statements are based on many assumptions and factors
that could cause future results to differ materially. Such factors include, but
are not limited to, changes in product mix, changes in fashion trends,
competitive factors, and general economic conditions, economic conditions in the
retail apparel industry, as well as other risks and uncertainties inherent in
the Company's business and the retail industry in general. Any changes in these
factors could result in significantly different results for the Company. The
Company further cautions that the forward-looking information contained herein
is not exhaustive or exclusive. The Company does not undertake to update any
forward-looking statements, which may be made from time to time by or on behalf
of the Company.

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