Everyone knows fashion retailing is a cyclical business. The better the economy is, the more consumers spend. Conversely, when the economy is weak, people tend to stay at home and keep their purse strings tied tight. As a result, when it looks an economic rough patch is on the horizon, investors steer clear of retailers that sell anything but the basic necessities of life. After all, looking good isn’t quite as important during tough times.

But there’s just one problem with that strategy: Sometimes that mindset doesn’t quite work to investors’ advantage. Right now, for example, there’s one retailer that’s managed to grow its top and bottom line for years now, no matter what kind of economic environment.

Better yet, the stock has shrugging off bear markets on its way to becoming one of top-performing stocks for the past 10 years, rising more than 650%. And the next several years don’t look like they’re going to be any different.

Amazing stats
The Buckle (NYSE: BKE) is a small-cap retailer made up of more than 400 stores selling competitively-priced casual apparel, footwear and accessories for young men and women. But this description doesn’t do the stock justice. A few key statistics and figures paint the true picture.

The company has had 10 straight years of rising revenue, from $401 million in 2003 to $1.06 billion in fiscal 2012. (Even when the recession was hitting other retailers in 2008, The Buckle kept chugging.)

Profits have also been rising for 10 straight years, from $32 million in 2003 to $151.5 million in fiscal 2012. The fact that the company didn’t have to slash prices and crimp margins when things got rough during the Great Recession underscores just how in touch The Buckle is with consumer demand, walking that fine line between “needs” and “wants.”

Net margin growth in eight of the past 10 years — from 8% in 2003 to 14.2% in fiscal 2012 — is just as impressive. This is because, for many retailers, expansion comes at the expense of margins. For The Buckle, however, growth has scaled quite nicely, as it has actually achieved an economy of scale.

These are phenomenal stats, not just for retailing, but for any kind of business. Take a look at the chart below…

What gives?
The growth streak almost seems too good to be true, prodding cautious investors to wonder whether such a track record is truly sustainable. Well, it is sustainable, because The Buckle has managed to do a handful of things consistently, which most other retail companies never even come close to doing.

One of the main differences is the sheer fact that the company hasn’t taken on debt to expand. Indeed, it hasn’t had any long-term debt on its books in years. It doesn’t fund expansion by issuing stock either. It relies solely on the cash it actually has in the bank to grow. While this may have meant a slower expansion than some of its competitors can boast, The Buckle has also avoided the trouble that debt eventually brings.#-ad_banner-#

While consistent earnings and margin growth suggest the company is well-managed, it’s not the only reason sales and profits are in such a long-term uptrend. The Buckle’s stores sell a mix of name-brand apparel, as well as private-label goods. The former draws a crowd, but produces just average margins. The latter isn’t a huge draw, but those goods are highly profitable. The key, however, is the proportional mix of goods, as the company’s value and fashion proposition keeps shoppers coming back.

Finally, The Buckle’s CEO Dennis Nelson owns 2.8 million shares of the company, versus 47.6 million issued and outstanding shares. This translates into ownership of about 6% of the entire company, which is more than considerable given today’s typical levels of insider ownership. If nothing else, investors can appreciate the fact that the man leading the company is very much on the same side of the table as its shareholders. 

Note that all three are subjective rather than objective advantages. But when it’s all said and done, it’s those intangible factors that give The Buckle its competitive edge and makes the company an outstanding investment. 

Risks to Consider: While the retailer is amazingly consistent when it comes to earnings growth, it’s this kind of reliability that may mean it also lags its peers when the economy is roaring and other retailers are capitalizing on a major surge in consumerism.

Action to Take –> For the moderate-growth segment of your portfolio, step into The Buckle and leave it alone. Shares have appreciated at a pace of 10% per year for the past 10 years, and could continue to grow at that pace for the foreseeable future.

It may not seem like a big number, but the stock and earnings are amazingly reliable in terms of growth. Though short-term traders may like to play the consistent up-and-down action it offers, the stock is best used as a longer-term growth position. And, what little it lacks in short-term stability, it offsets with a respectable dividend. The current yield is almost 2%, not counting the frequent special dividends, and yes, the payout has grown in step with the retailer’s rising income.

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