Burlington Stores’ Fiscal 2024 Triumph and Enhanced Outlook

Burlington Stores, Inc. demonstrated exceptional prowess in its second-quarter fiscal 2024 report, comfortably surpassing the Zacks Consensus Estimate for both sales and earnings. The company’s financial performance exhibited a robust growth trajectory, leading to an optimistic revision in its fiscal 2024 outlook.

Propelled by a strategic focus on driving growth and profitability, Burlington Stores has intensified its efforts to expand its store network substantially. Moreover, by enhancing its product mix with premium brands, the company aims to bolster its value proposition and appeal to a broader customer base.

Efficiency enhancements in the supply chain, including the integration of modern automation into distribution centers, have further bolstered Burlington Stores’ operational efficiency. Improved inventory management strategies have resulted in accelerated turnover rates and reduced markdowns, thus positively impacting overall profitability.

Unpacking Burlington Stores’ Q2 Financial Triumph

Burlington Stores posted adjusted earnings of $1.20 per share, a remarkable beat compared to the Zacks Consensus Estimate of 95 cents. The bottom line surged 100% from the year-ago quarter to 60 cents. Adjusted for the Bed Bath & Beyond leases acquisition, earnings stood at $1.24 per share, showcasing a substantial improvement from 63 cents reported in the previous year.

Recording total revenues of $2,465.5 million, a 13.4% surge from the preceding year, Burlington Stores outperformed the Zacks Consensus Estimate of $2,421 million. The company’s comparable store sales witnessed a notable 5% uptick from the previous year, with net sales amounting to $2,461.2 million, complemented by other revenues totaling $4.3 million.

Insight Into Burlington Stores’ Margin Performance

Noteworthy was Burlington Stores’ gross margin, which expanded by 110 basis points (bps) from the second quarter of fiscal 2023 to reach 42.8%. The sturdy increase, surpassing the anticipated 60 bps rise, was fueled by a 90 bps growth in merchandise margin, attributed to reduced markdowns. Additionally, freight expenses, improving by 20 bps year over year, were boosted by decreased freight rates and cost-saving initiatives.

The company observed a 13.7% year-over-year rise in adjusted selling, general and administrative (SG&A) expenses, amounting to $667.1 million. Although the adjusted SG&A expenses as a rate of sales elevated by 10 bps from the second quarter of fiscal 2023, Burlington Stores exceeded the estimated 9.6% year-over-year growth in adjusted SG&A expenses for the quarter.

Further, leveraging supply-chain expense optimization from ongoing distribution center productivity initiatives, product sourcing costs escalated to $192 million from $183 million in the year-ago quarter.

Highlighted by a substantial 43.3% surge from the second quarter of fiscal 2023, adjusted EBITDA touched $201.8 million, with the adjusted EBITDA margin witnessing a 170 bps enhancement to reach 8.2%. Burlington Stores’ adjusted EBIT soared to $115.2 million, exhibiting a remarkable 70.1% year-over-year increase from $67.7 million in the previous year.

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An Overview of Burlington Stores’ Store Expansion Endeavors

Burlington Stores significantly augmented its footprint in the fiscal second quarter by introducing 36 net new stores, culminating in a total of 1,057 locations by the quarter’s end. Additionally, the company relocated four larger, outdated stores as part of its ongoing strategy to optimize the store base.

Continuing on this trajectory, Burlington Stores aims to establish approximately 100 net new stores and shift around 30 locations in fiscal 2024. The sales generated by these new stores have outpaced the company’s expectations, typically exceeding $7 million in sales during their initial operational year. This strategic expansion plan forms the cornerstone of Burlington’s growth strategy as it forges ahead with expanding its store network across the United States.

Comprehensive Analysis of Burlington Stores’ Financial Position

Concluding the quarter with $659.9 million in cash and cash equivalents, $1.23 billion in long-term debt, and $1.07 billion in stockholders’ equity, Burlington Stores exhibited robust financial standing. The company boasted $1.48 billion in liquidity by the close of the fiscal second quarter, comprising $660 million in unrestricted cash and $816 million available under its ABL facility.

Between their term-loan facility, convertible notes, and other financial instruments, Burlington Stores managed $1.40 billion in total outstanding debt. During the fiscal second quarter, the company repurchased 269,508 shares for $61 million as part of its share repurchase plan, with $380 million still available under the authorization as of Aug 3., 2024.

Burlington Stores’ Upgraded Fiscal 2024 Projections

Foreseeing a 10-12% increase in total sales for the fiscal third quarter, Burlington Stores anticipates a comparable store sales increment ranging from 0-2% from the year-ago period. Moreover, the company projects a 60-80 bps year-over-year enhancement in adjusted EBIT margin for the third quarter.

With an anticipated adjusted effective tax rate of approximately 25%, Burlington Stores forecasts an adjusted EPS in the $1.45-$1.55 range for the third quarter, a notable rise from the adjusted EPS of $1.10 (excluding $7 million in expenses related to the Bed Bath & Beyond leases) reported in the previous year.

Looking into the fiscal fourth quarter, Burlington Stores envisions comparable store sales remaining flat or growing up to 2%, coupled with a total sales escalation between 5% and 7%. Anticipated EBIT margins show a decrease within the 50-80 bps range, with projected EPS in the $3.55-$3.75 interval. It is crucial to recognize that the transition to a 53rd week in the fiscal year is anticipated to exert considerable adverse effects on total sales, adjusted EBIT, and adjusted EPS in the fourth quarter.

Revamping its fiscal 2024 outlook, Burlington Stores now predicts a 9-10% escalation in total sales – slightly higher than the previous estimate of 8-10%. Comparable store sales are anticipated to grow within the 2-3% range, an improvement from the prior 0-2% estimate, indicating enhanced anticipated performance at individual stores. The adjusted EBIT margin is anticipated to expand within the 50-70 bps range, slightly surpassing the preceding estimate of 40-60 bps.

The adjusted EPS forecast has also been revised upward, with Burlington Stores now expecting a range of $7.66-$7.96, compared to the prior estimate of $7.35-$7.75, signaling an augmented overall profitability. Both projections exclude expenses pertaining to the Bed Bath & Beyond leases acquisition.

For fiscal 2024, management aims at executing a net capital expenditure, excluding landlord allowances, of $750 million. Net interest expenses are projected to reach $40 million, with an anticipated adjusted effective tax rate of 26%.

Over the last three months, this Zacks Rank #3 (Hold) entity showcased an 11.3% surge compared to the industry’s 7.7% growth.

Notable Stock Picks to Consider

Some commendable stocks to contemplate include Boot Barn Holdings, Inc. BOOT, Deckers Outdoor Corporation, and Steven Madden, Ltd. SHOO.

With a focus on western and work-related footwear, apparel, and accessories, Boot Barn operates as a lifestyle retail chain and presently holds a Zacks Rank #1 (Strong Buy).

Forecasts indicate a growth of 8.9% in Boot Barn’s fiscal 2025 earnings and a 10.7% surge in sales from the fiscal 2023 reported figures. Noteworthy is BOOT’s trailing four-quarter average earnings surprise of 7.1%.

Deckers Outdoor, renowned for its cutting-edge niche footwear and accessories, sits at a Zacks Rank #2 (Buy) currently. DECK presented a substantial 25.9% earnings surprise in the most recent quarter.

Projections for Deckers’ fiscal 2025 earnings show an 8.4% growth, alongside an 11.5% sales increment from the fiscal 2024 figures. Impressively, DECK boasts a trailing four-quarter average earnings surprise of 47.2%.

Specializing in fashion-forward name-brand and private-label footwear, Steven Madden currently holds a Zacks Rank of 2.

Predictions for Steven Madden’s 2024 earnings and sales reveal growth of 6.9% and 12.6%, respectively, from the previous year’s actuals. Notably, SHOO holds a trailing four-quarter average earnings surprise of 9.5%.

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