Buckle's (BKE) slowing sales growth and higher costs could weigh on gross margins and pressure investor sentiment, UBS said in a note.

The bank expects gross margin to contract year over year in the third quarter, citing elevated freight surcharges, input costs and occupancy expenses. UBS also noted a slowdown in online visits and search growth.

UBS said bearish investor sentiment and the stock's lower valuation relative to earlier in the year could limit downside risk. It expects the shares to perform in line with peers.

UBS maintained a neutral rating and lowered its price target to $45 from $46.

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