Company Analysis - Burlington Stores (NYSE: BURL) is given a hold rating due to near-term execution challenges and macroeconomic headwinds creating significant uncertainty [1] - The company's same-store sales growth (SSSG) is flat, indicating potential early signs of market share loss to competitors [1] Investment Approach - The investment strategy focuses on identifying businesses with the potential for long-term scaling and significant terminal value [1] - Emphasis is placed on understanding core business economics, including competitive advantages, unit economics, reinvestment opportunities, and management quality [1] - The goal is to translate these factors into long-term free cash flow generation and shareholder value creation [1]

Group 1 - Burlington Stores, Inc. reported first-quarter adjusted earnings per share of $1.60, exceeding the analyst consensus estimate of $1.41, while quarterly sales of $2.50 billion fell short of the expected $2.52 billion [1] - The company anticipates that tariffs will significantly pressure merchandise margins but believes they can offset this pressure if tariffs do not increase from current levels [2] - For the second quarter, Burlington expects adjusted EPS in the range of $1.20 to $1.30, compared to the estimate of $1.34, with total sales projected to increase by 5% to 7% [2] Group 2 - For FY25, Burlington expects total sales to rise by 6% to 8% following an 11% increase during Fiscal 2024 [3] - Following the earnings announcement, Burlington shares fell by 0.7% to $226.17 [3] Group 3 - Analysts have made adjustments to their price targets for Burlington following the earnings report, with Telsey Advisory Group lowering the target from $340 to $300, Barclays raising it from $254 to $299, and Evercore ISI Group lowering it from $345 to $310 [6]

Financial Performance - Net income for the three-month period ended May 3, 2025, was $100.8 million, an increase from $78.5 million in the same period last year, driven by higher sales and increased gross margin rate [108]. - Adjusted Net Income rose by $15.8 million to $102.6 million compared to the prior year, primarily due to higher sales and improved gross margin rate [115]. - Adjusted EBIT increased by $16.9 million to $146.3 million for the three months ended May 3, 2025, compared to the same period in the prior year [121]. - Adjusted EBITDA rose by $26.7 million to $238.1 million for the three months ended May 3, 2025, driven by higher sales and increased gross margin rate [121]. - Net sales improved by approximately $142.8 million, or 6.1%, to $2,500.1 million during the first quarter of Fiscal 2025, primarily due to net sales from 94 new stores opened since the end of the first quarter of Fiscal 2024 [136]. - Comparable store sales were flat at 0% for the three months ended May 3, 2025, compared to a 2% increase for the same period in the prior year [126]. - Gross margin as a percentage of net sales increased to 43.8% during the three months ended May 3, 2025, compared to 43.5% for the same period in the prior year [128]. - Income tax expense was $32.0 million for the first quarter of Fiscal 2025, with an effective tax rate of 24.1%, down from 28.4% in the prior year [147]. Store Operations and Expansion - The company opened 14 new stores during the three-month period, bringing the total store count to 1,115 as of May 3, 2025 [95]. - The company plans to average about 100 net new stores per year, targeting a total of 500 net new stores over the five-year period from Fiscal 2024 through Fiscal 2028 [100]. - The company aims to operate 2,000 stores in the long term, identifying numerous market opportunities for expansion [100]. - The company opened 14 new stores and closed three stores during the three-month period ended May 3, 2025, bringing the total store count to 1,115, with plans to open approximately 100 net new stores in Fiscal 2025 [167]. Inventory and Cash Flow - Inventory increased to $1,315.3 million as of May 3, 2025, compared to $1,140.8 million at May 4, 2024, primarily due to an increase in reserve inventory and new store openings [130]. - Cash and cash equivalents decreased by $623.6 million during the three months ended May 3, 2025, compared to a decrease of $183.0 million during the same period in the prior year [133]. - Cash used during the three-month period ended May 3, 2025, was $623.6 million, compared to $183.0 million for the same period in 2024, indicating a significant increase in cash outflow [154]. - Net cash used in operating activities was $28.9 million for the three-month period ended May 3, 2025, down from a net cash provided of $49.4 million in the same period in 2024, primarily due to changes in working capital [155]. - Net cash used in investing activities increased to $412.7 million for the three-month period ended May 3, 2025, compared to $165.5 million in the same period in 2024, driven by higher capital expenditures related to supply chain costs and store openings [156]. - Net cash used in financing activities was $182.0 million during the three-month period ended May 3, 2025, up from $66.9 million in the same period in 2024, mainly due to the settlement of the 2025 Convertible Notes and increased treasury stock repurchases [157]. - Capital expenditures for the three-month period ended May 3, 2025, amounted to $412.2 million, with an estimated total of approximately $950 million planned for Fiscal 2025 [159][160]. Economic and Market Conditions - General economic conditions, including inflation and consumer spending habits, remain a challenge, particularly affecting low-income shoppers, the company's core customer base [99]. - The company anticipates increased competition in the retail sector, necessitating continued differentiation from competitors through brand-name merchandise at discounted prices [104]. - The company acknowledges risks related to general economic conditions, including inflation and political situations, which may impact consumer confidence and spending [186]. - The company highlights the importance of adapting to changing consumer preferences and demand as a key factor for future growth [186]. Operational Challenges and Strategies - The company is focusing on driving comparable store sales growth by effectively chasing sales trends and operating with leaner inventories [96]. - The company expects to carry less inventory compared to historical levels, which should lead to faster inventory turns and lower markdowns [96]. - The company is investing in merchandising capabilities, including training, improved tools, and incremental headcount to strengthen vendor relationships and better forecast sales trends [97]. - The company is focused on optimizing existing stores and maintaining favorable lease terms to enhance operational efficiency [186]. - The company faces challenges related to labor costs and the ability to attract and retain quality employees, which are critical for sustaining growth [186]. - The company is subject to risks from disruptions in its distribution network and the need to protect its information systems against cyber-related attacks [186]. - The company notes that its advertising and marketing programs are essential for generating customer traffic and brand awareness [186]. Debt and Financial Commitments - As of May 3, 2025, total debt obligations included $1,236.1 million under the Term Loan Facility and $297.1 million of 2027 Convertible Notes [168]. - The company has $1,980.1 million in purchase commitments related to goods not received as of May 3, 2025, and $4,703.8 million in future minimum lease payments under operating leases [182]. - The 2027 Convertible Notes bear interest at a rate of 1.25% per year and may be converted into common stock, with an initial conversion price of approximately $205.93 per share [178][179]. - The company has authorized a share repurchase program of up to $1 billion, with $157.9 million remaining under the current authorization as of May 3, 2025 [161][162]. Forward-Looking Statements and Risks - The company emphasizes that past financial performance should not be relied upon as an indication of future performance due to various unpredictable factors [187]. - The company will not publicly update or revise forward-looking statements unless required by law, indicating a cautious approach to future projections [187]. - The company has no material changes in its quantitative and qualitative disclosures about market risk from those included in the Fiscal 2024 10-K [189]. - The company is committed to complying with increasingly rigorous privacy and data security regulations, which are vital for maintaining customer trust [186].

Core Insights - Burlington Stores, Inc. reported first-quarter fiscal 2025 results with year-over-year growth in revenues and earnings, although revenues fell short of the Zacks Consensus Estimate while earnings exceeded expectations [1][3] Financial Performance - Adjusted earnings per share (EPS) were $1.60, surpassing the Zacks Consensus Estimate of $1.42, and increased by 18.5% from $1.35 in the prior year [3] - Total revenues reached $2,504 million, a 6% increase from the previous year, but below the Zacks Consensus Estimate of $2,534 million [3] - Net sales rose 6.1% to $2,500.1 million, while other revenues decreased by 7.1% to $3.9 million [3] Margins and Costs - Gross margin improved to 43.8%, up 30 basis points from the first quarter of fiscal 2024, exceeding the estimate of 43.5% [4] - Adjusted selling, general and administrative (SG&A) expenses increased by 4.8% year over year to $669.5 million, with SG&A as a percentage of net sales decreasing by 30 basis points to 26.8% [5] - Product sourcing costs rose to $197 million from $183 million in the prior year [5] EBITDA and EBIT - Adjusted EBITDA increased by 12.6% to $238.1 million, while adjusted EBIT rose by 13.1% to $146.3 million [6] Cash, Debt, and Equity - The company ended the quarter with cash and cash equivalents of $371.1 million and long-term debt of $1.64 billion [7] - Total outstanding debt was $1.65 billion, including $1.24 billion under a term-loan facility and $297 million of convertible notes [8] Share Repurchase - Burlington Stores repurchased 445,285 shares for $105 million during the quarter, with $158 million remaining under its existing share repurchase authorization [9] Guidance - For Q2 fiscal 2025, total sales are expected to grow by 5-7%, with comparable store sales projected to remain flat to up 2% [12] - Adjusted EPS for Q2 is anticipated to be between $1.20 and $1.30, compared to $1.24 in the prior year [13] - For fiscal 2025, total sales are expected to increase by 6-8%, with comparable store sales projected to rise between 0% and 2% [14]

Group 1 - Burlington Stores, Inc. (NYSE: BURL) is facing challenges due to tariff risks, but a recent U.S. trade court ruling has ordered a halt to most tariffs, which may benefit the company [1] - BAD BEAT Investing, led by Quad 7 Capital, has a history of providing investment opportunities and has been predominantly long since May 2020, with a strategy focused on short- and medium-term investments [1] - The investment group emphasizes teaching investors to become proficient traders through in-depth research and clear entry and exit targets, aiming to save time for investors [1] Group 2 - The analysts involved in BAD BEAT Investing have a diverse range of expertise, including business, policy, economics, and game theory, which supports their investment strategies [1] - The group has been recognized for their significant market calls, including a notable recommendation to sell everything and go short in February 2020 [1]

Core Insights - Burlington Stores reported revenue of $2.5 billion for the quarter ended April 2025, reflecting a 6% increase year-over-year [1] - The company's EPS was $1.60, up from $1.42 in the same quarter last year, indicating a positive earnings performance [1] - Revenue fell short of the Zacks Consensus Estimate of $2.53 billion, resulting in a surprise of -1.19%, while EPS exceeded expectations by +12.68% [1] Financial Performance - The reported net sales of $2.50 billion represented a year-over-year change of +6.1% [4] - Other revenue was reported at $3.95 million, which was below the estimated $4.18 million, showing a decline of -6.9% compared to the previous year [4] - The number of stores at the end of the period remained stable at 1,115, matching analyst estimates [4] Market Performance - Shares of Burlington Stores have returned +6% over the past month, slightly underperforming the Zacks S&P 500 composite's +6.7% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Financial Data and Key Metrics Changes - Total sales grew by 6% compared to 11% growth last year, while comparable store sales were flat, following 2% growth last year [8][29] - EBIT margin increased by 30 basis points, and adjusted EPS was up 18% over last year despite flat comparable sales [10][29] - Gross margin rate for Q1 was 43.8%, an increase of 30 basis points year-over-year, driven by a 20 basis point increase in merchandise margin [27] Business Line Data and Key Metrics Changes - The company experienced a flat comp sales trend across all demographic trade areas, indicating a broad-based slowdown [18][68] - Reserve inventory was up 31% compared to last year, reflecting strong purchasing ahead of tariffs [30][76] Market Data and Key Metrics Changes - The company noted a deceleration in comp sales from Q4 to Q1, with concerns about macroeconomic indicators and potential recession risks [19][84] - The Southeast region outperformed the chain, while the Midwest region trailed due to unfavorable weather [96] Company Strategy and Development Direction - The company is focused on its "Burlington Two Point O" strategy, emphasizing merchandising capabilities and store experience improvements [23][107] - Plans to open 100 net new stores in 2025, with a significant portion expected to open in the latter half of the year [34][116] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the impact of tariffs and the state of the consumer, highlighting the need for flexibility in operations [13][20] - The company is prepared to navigate potential challenges and believes it can emerge stronger from the current environment [17][37] Other Important Information - The company has a new $500 million share repurchase authorization approved by the Board of Directors [30] - Total liquidity at the end of the quarter was approximately $1.1 billion, consisting of cash and availability on the ABL [30] Q&A Session Summary Question: Impact of tariffs on off-price retail - Management indicated that disruption from tariffs could create both risks and opportunities for off-price retailers, depending on the situation [40][46] Question: Monthly comp sales trend in Q1 - Comp sales were down about 2% in February, improved in March, and were flat in April, with May showing similar trends [58][60] Question: Comp performance by demographic - Lower income trade areas outperformed the rest of the chain, while Hispanic consumer trends remained stable [68][72] Question: Freight costs and guidance - Guidance is contingent on holding ocean freight costs to contracted rates, with potential risks from spot market exposure [90][93] Question: Store openings and layout - The company expects 25% of new stores to open in the first half of 2025, with the majority in the third quarter, including newly acquired Joann's locations [116]

Financial Data and Key Metrics Changes - Total sales grew by 6% compared to 11% growth last year, while comp sales were flat after 2% growth last year, both metrics at the midpoint of guidance [7][10] - EBIT margin increased by 30 basis points, and adjusted EPS was up 18% over last year despite flat comp sales [8][28] - Gross margin rate for Q1 was 43.8%, an increase of 30 basis points versus last year, driven by a 20 basis point increase in merchandise margin and a 10 basis point decrease in freight expense [26] Business Line Data and Key Metrics Changes - Comp store sales were flat, with a notable deceleration from Q4 to Q1, affecting all demographic trade areas [17][68] - The beauty business was the best performing category in Q1, while overall performance across categories was fairly broad based [97] Market Data and Key Metrics Changes - Comparable store inventories were down 8% versus the end of Q1 2024, with reserve inventory up 31% compared to last year, reflecting strategic acquisitions to mitigate tariff impacts [28][76] - The Southeast Region outperformed the chain, while the Midwest Region trailed due to unfavorable weather [95] Company Strategy and Development Direction - The company is focused on its "Burlington Two Point O" strategy, emphasizing merchandising capabilities and store experience improvements [21][105] - Plans to open 100 net new stores in 2025, with a significant portion expected to open in the latter half of the year [23][115] - The company is actively managing tariff impacts by seeking margin and expense savings opportunities [9][54] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about external uncertainties, particularly regarding tariffs and the state of the consumer, which could impact sales trends [10][36] - The company has a playbook to manage through economic slowdowns and inflation, focusing on providing value to customers [19][84] - Management remains optimistic about long-term growth potential despite short-term challenges [20][88] Other Important Information - The company ended Q1 with approximately $1.1 billion in total liquidity, including $371 million in cash [29] - A new two-year $500 million share repurchase authorization was approved by the Board of Directors [30] Q&A Session Summary Question: Impact of tariffs on off-price retail - Management indicated that disruption from tariffs could create both risks and opportunities for off-price retailers, with recent tariff reductions potentially leading to attractive buying opportunities [40][46] Question: Monthly comp sales trend in Q1 - Comp sales were down about 2% in February, improved in March and April, with May month-to-date trends similar to the March-April combined period [58][61] Question: Comp performance by demographic - Lower income trade areas outperformed the chain, and Hispanic consumer trends showed relative strength, although border stores underperformed [70][72] Question: Freight costs and guidance - Guidance is contingent on holding ocean freight costs to contracted rates, with secured truck and intermodal capacity at favorable rates [89][91] Question: Marketing programs update - The marketing strategy has evolved to focus on value, with an integrated approach to enhance customer experience and store layout [102][105]

Core Viewpoint - Burlington Stores reported quarterly earnings of $1.60 per share, exceeding the Zacks Consensus Estimate of $1.42 per share, and showing an increase from $1.42 per share a year ago, representing an earnings surprise of 12.68% [1][2] Financial Performance - The company posted revenues of $2.5 billion for the quarter ended April 2025, which was 1.19% below the Zacks Consensus Estimate, but an increase from $2.36 billion year-over-year [2] - Over the last four quarters, Burlington Stores has surpassed consensus EPS estimates four times and topped consensus revenue estimates two times [2] Stock Performance - Burlington Stores shares have declined approximately 16.3% since the beginning of the year, contrasting with the S&P 500's gain of 0.1% [3] - The current Zacks Rank for Burlington Stores is 3 (Hold), indicating expected performance in line with the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.33 on revenues of $2.64 billion, and for the current fiscal year, it is $9.21 on revenues of $11.47 billion [7] - The estimate revisions trend for Burlington Stores is mixed, and future revisions may change following the recent earnings report [6] Industry Context - The Retail - Discount Stores industry is currently ranked in the bottom 39% of over 250 Zacks industries, suggesting that the industry outlook can significantly impact stock performance [8]

Financial Performance - Total sales increased by 6% year-over-year to $2,500 million, while comparable store sales remained flat[4] - Net income for the first quarter was $101 million, with diluted EPS of $1.58, compared to $79 million and $1.22 per share in the same quarter last year[9] - Adjusted EPS rose by 18% to $1.67, exceeding guidance, while adjusted EBIT margin increased by 30 basis points[6] - Net sales for the three months ended May 3, 2025, were $2,500,075, an increase of 6.05% from $2,357,318 for the same period in 2024[24] - Total revenue for the same period was $2,504,020, up 6.03% from $2,361,553 in the prior year[24] - Net income increased to $100,833, representing a 28.5% rise from $78,514 in the previous year[24] - Diluted net income per share rose to $1.58, compared to $1.22 for the same period last year, marking a 29.5% increase[24] - Adjusted Net Income for the three months ended May 3, 2025, was $102,582, up from $86,813, reflecting an increase of 18.2%[37] - Adjusted EBITDA for the same period was $238,103, an increase of 12.6% from $211,361 in the prior year[37] - The total net income for the fiscal year ended February 1, 2025, is $503,639,000[38] Inventory and Capital Expenditures - Merchandise inventories increased by 15% to $1,315 million, while comparable store inventories decreased by 8%[7] - Capital expenditures are projected to be approximately $950 million, with plans to open around 100 net new stores[14] - The company incurred $409,700 in capital expenditures during the three months ended May 3, 2025, compared to $164,837 in the same period last year[28] Liquidity and Debt - The company ended the quarter with $1,119 million in liquidity and $1,652 million in total debt[10] - Cash and cash equivalents decreased to $371,092 from $742,332 at the end of the same period last year, a decline of 50%[28] - Total assets as of May 3, 2025, were $8,549,897, a decrease from $8,770,413 at the end of the previous quarter[26] - Total current liabilities decreased to $1,956,841 from $2,097,322 in the same period last year, a reduction of 6.7%[26] Tax and Shareholder Returns - The effective tax rate decreased to 24.1% from 28.4% in the prior year[9] - The company has authorized an additional $500 million for share repurchases, effective through May 2027[10] - The effective tax rate on a GAAP basis for Q1 2025 is 24.1%, down from 28.4% in Q1 2024[38] - The tax effect of adjustments for Q1 2025 is $(1,336,000), reflecting the impact of various excluded items[40] Adjusted Financial Metrics - Adjusted Net Income for Q1 2025 is $77,487,000, compared to $73,760,000 in Q1 2024[38] - Adjusted Earnings per Share (EPS) for Q1 2025 is $1.20, while it was $1.14 in Q1 2024[38] - The net favorable lease costs for Q1 2025 amount to $3,138,000, contributing to the adjusted net income[38] - The company recorded litigation matters costs of $1,925,000 in Q1 2025, impacting the net income[39] Other Financial Adjustments - The company incurred impairment charges of $12,921,000 during the fiscal year ended February 1, 2025[38] - The loss on extinguishment of debt for the fiscal year ended February 1, 2025, is $1,412,000[39]