Market Overview

Burlington Stores, Inc. Reports Second Quarter 2019 Results Above Guidance and Increases Full Year 2019 Sales and Adjusted EPS Outlook

Share:
  • On a GAAP basis, total sales rose 10.5%, net income increased 19%, EPS increased 22% to $1.26, and total inventory decreased 2%
  • On a Non-GAAP basis,
    - Comparable store sales increased 3.8%, on top of last year's 2.9% increase
    - Adjusted EPS rose 19% to $1.36, above guidance of $1.11-$1.15
    - Comparable store inventory decreased 7%
  • Increasing outlook for FY19 Adjusted EPS to $7.14-$7.22, up from $6.93-$7.01 

BURLINGTON, N.J., Aug. 29, 2019 (GLOBE NEWSWIRE) -- Burlington Stores, Inc. (NYSE:BURL), a nationally recognized off-price retailer of high-quality, branded apparel at everyday low prices, today announced its results for the second quarter ended August 3, 2019.

Tom Kingsbury, CEO, stated, "We are very pleased with our second quarter results, driven by our 3.8% comparable store sales increase and 10.5% overall sales growth, which resulted in a 19% increase in Adjusted EPS, well ahead of our guidance. In addition, based on our disciplined inventory management, our comparable store inventory decreased 7%, putting us in a very good position to take advantage of the abundant values available in the marketplace. I would like to thank our store, supply chain and corporate teams for contributing to these strong results."

Fiscal 2019 Second Quarter Operating Results (for the 13 week period ended August 3, 2019 compared with the 13 week period ended August 4, 2018)

  • Total sales increased 10.5% to $1,656 million, while comparable store sales increased 3.8%. New and non-comparable stores contributed an incremental $115 million in sales during the quarter. 
  • Gross margin rate was flat vs. last year at 41.4%. Merchandise margin increased 30 basis points, which was offset by a 30 basis point increase in freight costs. Product sourcing costs, which are included in selling, general and administrative expenses (SG&A), were 10 basis points lower as a percentage of sales vs. the Fiscal 2018 second quarter. Product sourcing costs include the costs of processing goods through our supply chain and buying costs.
  • SG&A increased $53 million to $532 million for the second quarter of Fiscal 2019, primarily due to store related costs associated with our new and non-comparable stores. As a result of our adoption of the new Lease Accounting Standard, favorable lease costs, initially recorded as a result of purchase accounting that occurred in 2006, is now included in SG&A. In prior periods, these costs were included in depreciation and amortization.
  • Adjusted SG&A, defined as SG&A less product sourcing costs and favorable lease costs, as a percentage of sales decreased 30 basis points to 26.6%. This decrease was driven by leverage on fixed expenses due to strong sales growth, as well as disciplined expense management and profit improvement initiatives.
  • Other Income and Revenue decreased by $3 million, or 20 basis points, driven primarily by $2 million in insurance gains recorded in the second quarter of Fiscal 2018.  
  • The effective tax rate increased 110 basis points to 11.6%.  The Adjusted Effective Tax Rate was 12.8% vs. last year's Adjusted Effective Tax Rate of 17.1%, excluding the revaluation of deferred tax liabilities resulting from changes to New Jersey state tax law.
  • Net income increased 19% to $85 million, or $1.26 per share vs. $1.03 last year, and Adjusted Net Income increased 16% to $91 million, or $1.36 per share, vs. $1.15 last year. This increase in Adjusted Net Income was driven primarily by higher sales growth, as well as leverage on fixed expenses, disciplined expense management and profit improvement initiatives.
  • Fully diluted shares outstanding amounted to 67.3 million at the end of the quarter compared with 68.8 million at the end of last year's second quarter. The decrease was primarily the result of share repurchases under the Company's share repurchase program, discussed in more detail below. From the end of the second quarter of Fiscal 2018 through the end of the second quarter of Fiscal 2019, the Company has repurchased approximately 1.8 million shares of its common stock under its share repurchase program.
  • Adjusted EBITDA increased 12%, or $18 million higher than last year's second quarter. The 10 basis point increase in Adjusted EBITDA as a percentage of sales was primarily driven by higher sales and leverage on fixed expenses, due to disciplined expense management and profit improvement initiatives, which was offset partially by lower other income and revenue. Adjusted EBIT increased 13%, or $13 million above the prior year period, to $118 million.

First Six Months Fiscal 2019 Results

  • Total sales increased 8.9%, which included a comparable store sales increase of 1.9% over the first six months of Fiscal 2018, on top of last year's 3.8% comparable store sales increase.  Net income increased 6% over the prior year period to $162 million, or $2.40 per share vs. $2.23 last year. Adjusted EBIT increased by 5%, or $11 million above last year, to $236 million, representing a 30 basis point decrease as a percentage of sales vs. the prior year period.  Adjusted Net Income of $177 million was up 7% vs. last year, while Adjusted EPS was $2.62 vs. $2.41 in the prior year period.  

Inventory

  • Merchandise inventories were $824 million vs. $844 million last year. The decrease was due primarily to a 7% decrease in comparable store inventory at the end of the second quarter of Fiscal 2019.  Pack and hold inventory was 29% of total inventory at the end of the second quarter of Fiscal 2019 compared to 26% at the end of the second quarter of Fiscal 2018.

Share Repurchase Activity

  • During the second quarter, the Company invested $51 million of cash to repurchase 300,742 shares of its common stock. As of the end of the second quarter, the Company had $124 million remaining on its current share repurchase authorization.  In addition, we are pleased to announce that the Company's Board of Directors authorized the repurchase of up to an additional $400 million of common stock, which is authorized to be executed through August 2021. 

Full Year Fiscal 2019 and Third Quarter 2019 Outlook

For Fiscal 2019 (the 52-weeks ending February 1, 2020), the Company now expects:

  • Total sales to increase in the range of 8.8% to 9.3%; this assumes comparable store sales to increase in the range of 2% to 3% for the third and fourth quarters of Fiscal 2019, resulting in a full year comparable store sales increase of 2.0% to 2.5% on top of the 3.2% increase during Fiscal 2018;
  • Depreciation and amortization, exclusive of favorable lease costs, to be approximately $210 million;
  • Adjusted EBIT margin to be flat to up 10 basis points vs last year;
  • Interest expense of approximately $52 million;
  • An effective tax rate of approximately 20 to 21%;
  • To open 50 net new stores, and invest Net Capital Expenditures of approximately $310 million; and
  • Based on second quarter results, Adjusted EPS in the range of $7.14 to $7.22, utilizing an updated fully diluted share count of approximately 67.3 million, as compared to Fiscal 2018 net income per share of $6.04 and Fiscal 2018 Adjusted EPS of $6.44. This outlook excludes an expected $0.05 per share impact of management transition costs.

For the third quarter of Fiscal 2019 (the 13 weeks ending November 2, 2019), the Company expects:

  • Total sales to increase in the range of 8.5% to 9.5%;
  • Comparable store sales to increase 2% to 3%;
  • An effective tax rate of approximately 20 to 21%; and
  • Adjusted EPS in the range of $1.37 to $1.41, which assumes a fully diluted share count of approximately 67.1 million, as compared to Fiscal 2018 third quarter net income per share of $1.12 and Fiscal 2018 third quarter Adjusted EPS of $1.21. This outlook excludes an expected $0.02 per share impact of management transition costs.

The Company has not presented a quantitative reconciliation of the forward-looking non-GAAP financial measures set out above to their most comparable GAAP financial measures because it would require the Company to create estimated ranges on a GAAP basis, which would entail unreasonable effort. Adjustments required to reconcile forward-looking non-GAAP measures cannot be predicted with reasonable certainty but may include, among others, costs related to debt amendments, loss on extinguishment of debt, and impairment charges, as well as the tax effect of such items. Some or all of those adjustments could be significant.

Note Regarding Non-GAAP Financial Measures

The foregoing discussion of the Company's operating results includes references to Adjusted SG&A, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share (or Adjusted EPS), Adjusted EBIT (or Operating Margin), and Adjusted Effective Tax Rate. The Company believes these measures are useful in evaluating the operating performance of the business and for comparing its historical results to that of other retailers. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measure later in this document.

Publication of the Company's Inaugural Corporate Social Responsibility Report
The Company has released its first annual Corporate Social Responsibility report, which discloses the Company's approach to managing environmental, social and governance (ESG) issues of import to the business and stakeholders. Covering the Company's Fiscal Year 2018, which ended on February 2, 2019, the Corporate Social Responsibility report provides investors and other interested parties with the Company's overall performance on a range of ESG issues and specific initiatives pertaining to Burlington's associates, environmental impacts, supply chain, and governance and ethics, as well as the communities in which Burlington operates. The report was informed by several reporting frameworks, including the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB), and CDP, and feedback from stakeholders to better understand the issues of most interest to our stakeholders. Burlington's 2018 Corporate Social Responsibility report can be found at www.burlingtoninvestors.com/corporate-social-responsibility.

Second Quarter 2019 Conference Call

The Company will hold a conference call on Thursday August 29, 2019 at 8:30 a.m. Eastern Time to discuss the Company's second quarter results. The U.S. toll-free dial-in for the conference call is 1-866-437-5084 and the international dial-in number is 1-409-220-9374.

A live webcast of the conference call will also be available on the investor relations page of the Company's website at www.burlingtoninvestors.com. For those unable to participate in the conference call, a replay will be available beginning after the conclusion of the call on August 29, 2019 through September 5, 2019. The U.S. toll-free replay dial-in number is 1-855-859-2056 and the international replay dial-in number is 1-404-537-3406. The replay passcode is 3268106. Additionally, a replay of the call will be available on the investor relations page of the Company's website at www.burlingtoninvestors.com.

Investors and others should note that Burlington Stores currently announces material information using SEC filings, press releases, public conference calls and webcasts. In the future, Burlington Stores will continue to use these channels to distribute material information about the Company, and may also utilize its website and/or various social media sites to communicate important information about the Company, key personnel, new brands and services, trends, new marketing campaigns, corporate initiatives and other matters. Information that the Company posts on its website or on social media channels could be deemed material; therefore, the Company encourages investors, the media, our customers, business partners and others interested in Burlington Stores to review the information posted on its website, as well as the following social media channels:

Facebook (https://www.facebook.com/BurlingtonCoatFactory/) and Twitter (https://twitter.com/burlington).

Any updates to the list of social media channels the Company may use to communicate material information will be posted on the investor relations page of the Company's website at www.burlingtoninvestors.com.

About Burlington Stores, Inc.

Burlington Stores, Inc., headquartered in New Jersey, is a nationally recognized off-price retailer with Fiscal 2018 net sales of $6.6 billion. The Company is a Fortune 500 company and its common stock is traded on the New York Stock Exchange under the ticker symbol "BURL." The Company operated 691 stores as of the end of the second quarter of Fiscal 2019, inclusive of an internet store, in 45 states and Puerto Rico, principally under the name Burlington Stores. The Company's stores offer an extensive selection of in-season, fashion-focused merchandise at up to 60% off other retailers' prices, including women's ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home and coats.

For more information about the Company, visit www.burlingtonstores.com.

Investor Relations Contacts:
David J. Glick
855-973-8445
Info@BurlingtonInvestors.com

Allison Malkin
ICR, Inc.
203-682-8225

Safe Harbor for Forward-Looking and Cautionary Statements
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act). All statements other than statements of historical fact included in this release, including those made in the section describing our outlook for future periods, are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. We do not undertake to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those we expected, including general economic conditions; our ability to successfully implement one or more of our strategic initiatives and growth plans; the availability of desirable store locations on suitable terms; changing consumer preferences and demand; industry trends, including changes in buying, inventory and other business practices; competitive factors, including pricing and promotional activities of major competitors and an increase in competition within the markets in which we compete; the availability, selection and purchasing of attractive merchandise on favorable terms; import risks, including  tax and trade policies, tariffs and government regulations; weather patterns, including, among other things, changes in year-over-year temperatures; our future profitability; our ability to control costs and expenses; unforeseen cyber-related problems or attacks; any unforeseen material loss or casualty; the effect of inflation; regulatory and tax changes; our relationships with employees; the impact of current and future laws and the interpretation of such laws; terrorist attacks, particularly attacks on or within markets in which we operate; natural and man-made disasters, including fire, snow and ice storms, flood, hail, hurricanes and earthquakes; our substantial level of indebtedness and related debt-service obligations; restrictions imposed by covenants in our debt agreements; availability of adequate financing; our dependence on vendors for our merchandise; domestic events affecting the delivery of merchandise to our stores; existence of adverse litigation; and each of the factors that may be described from time to time in our filings with the Securities and Exchange Commission (SEC). For each of these factors, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended.


BURLINGTON STORES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(All amounts in thousands, except per share data)

    Three Months Ended     Six Months Ended  
    August 3,     August 4,     August 3,     August 4,  
    2019     2018     2019     2018  
REVENUES:                                
Net sales   $ 1,656,363     $ 1,498,633     $ 3,284,910     $ 3,017,079  
Other revenue     5,659       6,109       11,306       12,371  
Total revenue     1,662,022       1,504,742       3,296,216       3,029,450  
COSTS AND EXPENSES:                                
Cost of sales     970,421       877,474       1,931,739       1,770,156  
Selling, general and administrative expenses     531,843       479,077       1,049,221       947,424  
Costs related to debt amendments     7       79       (375 )     79  
Depreciation and amortization     52,261  
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