Burlington Stores Reports Underperformance in Third Quarter of FY’2024

Burlington Stores, Inc. (NYSE: BURL) reported results for the third quarter of fiscal year 2024, showcasing a total sales growth of 11% compared to the same period in fiscal 2023. Comparable store sales, however, saw only a modest increase of 1%, following a 6% rise last year. This indicates a potential plateau in in-store sales growth, although the company has managed to maintain its overall sales trajectory.

Net income for the quarter stood at $91 million, translating to diluted earnings per share (EPS) of $1.40. Adjusted for certain expenses related to acquired Bed Bath & Beyond leases, the adjusted EPS rose to $1.55, marking a 41% increase. The company’s adjusted EBIT margin also improved by 80 basis points, driven by higher gross margins and better leverage on supply chain expenses.

CEO Michael O’Sullivan highlighted the company’s proactive measures in managing inventory and adapting to changing weather conditions, which impacted sales in cold weather categories. The gross margin rate increased to 43.9% from 43.2% in the prior year, aided by lower markdowns and improved freight expenses.

Despite rising product sourcing costs, which reached $210 million, these expenses decreased as a percentage of net sales. Selling, general, and administrative expenses also showed improvement, declining to 35.4% of net sales.

Burlington Reports Underperformance in Q3 Fiscal 2024

Burlington’s performance in the third quarter slightly underperformed against market expectations. Analysts had anticipated an EPS of $1.54 and revenue of $2.55 billion. While the adjusted EPS of $1.55 exceeded expectations, the reported EPS of $1.40 fell short.

The company’s revenue, at $2.53 billion, was just shy of the expected $2.55 billion. This shortfall can be attributed to the slowdown in sales momentum due to warmer temperatures affecting cold weather merchandise, which constitutes about 15% of the company’s sales.

Despite these challenges, Burlington’s underlying comparable store sales growth, excluding cold weather categories, was 4%, consistent with trends since March. This suggests that the company’s core business remains robust, albeit impacted by seasonal variations. The management’s agile response to these conditions, including controlling liquidity and receipts, has helped mitigate potential downsides and maintain overall growth.

The company’s strategic focus on margin improvement and earnings growth has paid off, as evidenced by the 80 basis point increase in adjusted EBIT margin and significant EPS growth. These results reflect Burlington’s ability to navigate external pressures while enhancing its financial metrics, although the slight miss on revenue underscores the need for continued adaptability in its sales strategies.

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Burlington Raises Adjusted EPS Guidance for Fiscal Year 2024

Burlington has raised its adjusted EPS guidance for fiscal year 2024 to a range of $7.76 to $7.96, demonstrating confidence in its ongoing performance. The company expects total sales to increase by 9% to 10% for the full fiscal year, with comparable store sales projected to rise by approximately 2%. This outlook is on top of a 10% increase in the previous fiscal year, indicating sustained growth expectations despite the competitive retail landscape.

For the upcoming fourth quarter, Burlington anticipates total sales growth between 5% and 7%, with comparable store sales expected to increase by 0% to 2%. The company is planning cautiously for the holiday season, maintaining this guidance but remaining prepared to capitalize on stronger trends if they materialize. Adjusted EPS for the fourth quarter is projected to be between $3.55 and $3.75, compared to $3.69 in the prior year, excluding certain expenses.

Burlington’s strategic initiatives, including opening 101 new stores and managing capital expenditures, are poised to support its growth trajectory. The company’s strong inventory position and proactive inventory management are expected to enhance its competitive edge, particularly during peak selling periods.

Disclaimer: The author does not hold or have a position in any securities discussed in the article.