Burlington Stores(US:BURL)2023-08-23 16:00Financial Performance - Net income for the three months ended July 29, 2023 was $30.892 million, compared to $11.966 million for the same period in 2022[22] - Total comprehensive income for the six months ended July 29, 2023 was $71.046 million, up from $46.351 million in the same period of 2022[22] - Net income for the six months ended July 29, 2023, was $63,640 thousand, compared to $28,139 thousand for the same period in 2022[28] - Net income for the period ending July 30, 2022, was $11.966 million[38] - Net income for the six months ended July 29, 2023 was $63.64 million, compared to $28.139 million for the same period in 2022[89] - Net income for the three months ended July 29, 2023 increased to $30.9 million from $12.0 million in the same period in 2022, driven by higher sales and increased gross margin rate[133] - Adjusted Net Income for the three months ended July 29, 2023 increased by $15.9 million to $38.9 million compared to the same period in the prior year[142] - Adjusted EBITDA for the three months ended July 29, 2023 increased by $30.3 million to $140.8 million compared to the same period in the prior year[146] - Adjusted EBITDA for the six months ended July 29, 2023, rose to $298.126 million, up from $235.982 million in the same period in 2022[148] - Net income for the three months ended July 29, 2023, increased to $30.892 million, compared to $11.966 million in the same period in 2022[148] - Net income for Q2 Fiscal 2023 was $30.9 million, up from $12.0 million in Q2 Fiscal 2022, driven by higher sales and increased gross margin rate[179] - Net income for the first half of Fiscal 2023 was $63.6 million, compared to $28.1 million in the same period of Fiscal 2022, driven by higher sales and increased gross margin rate[198] Cash Flow and Liquidity - Cash and cash equivalents decreased to $520.974 million as of July 29, 2023 from $872.623 million at January 28, 2023[26] - Net cash provided by operating activities was $29,826 thousand, a significant improvement from a net cash used of $152,862 thousand in the prior year[28] - Net cash used in investing activities decreased to $177,658 thousand from $186,395 thousand in the previous year[28] - Net cash used in financing activities was $210,399 thousand, down from $296,849 thousand in the same period last year[28] - Cash, cash equivalents, restricted cash, and restricted cash equivalents decreased to $520,974 thousand from $879,205 thousand at the beginning of the period[28] - Cash payments arising from operating lease liabilities for the six months ended July 29, 2023, were $282.825 million[52] - Cash and cash equivalents, including restricted cash, decreased by $358.2 million during the six months ended July 29, 2023, compared to a decrease of $636.1 million in the same period in 2022[157] - Net cash provided by operating activities was $29.8 million for the six-month period ended July 29, 2023, compared to net cash used of $152.9 million in the same period of 2022, primarily due to improved sales and gross margin[202] - Net cash used in investing activities was $177.7 million for the six-month period ended July 29, 2023, compared to $186.4 million in the same period of 2022, mainly due to decreased capital expenditures related to stores[203] - Net cash used in financing activities was $210.4 million for the six-month period ended July 29, 2023, compared to $296.8 million in the same period of 2022, driven by fewer share repurchases and increased debt repayments[204] Balance Sheet and Assets - Merchandise inventories stood at $1.161 billion as of July 29, 2023, down from $1.182 billion at January 28, 2023[26] - Total current assets were $1.917 billion as of July 29, 2023, compared to $2.284 billion at January 28, 2023[26] - Long-term debt decreased to $1.348 billion as of July 29, 2023 from $1.462 billion at January 28, 2023[26] - Total stockholders' equity increased to $825.859 million as of July 29, 2023 from $794.905 million at January 28, 2023[26] - Accumulated earnings increased to $708.055 million as of July 29, 2023 from $644.415 million at January 28, 2023[26] - Merchandise inventories increased by $20,460 thousand, compared to a decrease of $245,687 thousand in the prior year[28] - Long-term debt as of July 29, 2023, totaled $1,361.6 million, with net long-term debt of $1,347.7 million after deducting current maturities[54] - The fair value of the interest rate swap contract as of July 29, 2023, was $36.1 million, classified as other assets[68] - Working capital decreased to $273.4 million as of July 29, 2023, from $320.5 million as of July 30, 2022, primarily due to decreased inventory, partially offset by an increased cash balance[205] Debt and Financing - The Term Loan Facility interest rate increased to 7.4% as of July 29, 2023, compared to 4.4% in the previous year[56] - The company issued $805.0 million of 2.25% Convertible Senior Notes due 2025, with an effective interest rate of 2.8%[56][60] - In Q1 2023, the company exchanged $110.3 million in Convertible Notes for $133.3 million in cash, resulting in $24.6 million in pre-tax debt extinguishment charges[58] - The ABL Line of Credit was increased to $900.0 million, with $818.7 million available as of July 29, 2023[62][64] - The company amended its interest rate swap to a SOFR-based rate of 2.16%, hedging $450.0 million of variable rate exposure under the Term Loan Facility[65] - The letter of credit sublimit under the ABL Line of Credit was increased to $250 million, with scheduled reductions starting April 1, 2024[63] - Interest expense for the three months ended July 29, 2023 was $(1.61 million), compared to $2.847 million for the same period in 2022[70] - Net reclassification into earnings for the six months ended July 29, 2023 was $(2.006 million), compared to $4.921 million for the same period in 2022[70] - The company estimates $12.9 million will be reclassified from accumulated other comprehensive income as a reduction to interest expense over the next twelve months[70] - Interest expense increased by $8.8 million in the first half of Fiscal 2023 to $38.9 million, driven by higher interest rates on the unhedged portion of the term loan[191] Leases and Rent - Total lease liabilities as of July 30, 2022, amounted to $3.201 billion for operating leases and $31.495 million for finance leases[42] - Future minimum lease payments for operating leases total $3.915 billion, with $43.820 million for finance leases[42] - Weighted average discount rate for operating leases is 5.2%, and for finance leases, it is 6.0%[42] - Weighted average remaining lease term is 7.9 years for operating leases and 11.8 years for finance leases[42] - Total net rent expense for the six months ended July 29, 2023, was $389.635 million[49] - The company committed to $206.6 million for 40 additional store leases acquired from Bed Bath & Beyond[48] Stock and Compensation - The company had 64,850,028 shares of common stock outstanding as of July 29, 2023[16] - Stock-based compensation expense increased to $36,147 thousand from $33,878 thousand year-over-year[28] - Total stock-based compensation for the period ending July 30, 2022, was $17.173 million[38] - The company repurchased 399,772 shares of common stock for $77.5 million during the six months ended July 29, 2023[87] - As of July 29, 2023, the company had $269.9 million remaining under its share repurchase authorization[87] - As of July 29, 2023, the company had 5,178,607 shares of common stock available for issuance under its 2022 Omnibus Incentive Plan[92] - Non-cash stock compensation expense for the three months ended July 29, 2023 was $19.4 million, compared to $17.2 million for the same period in 2022[93] - Total stock options outstanding as of July 29, 2023 were 1,434,142 with a weighted average exercise price of $196.58[95] - The aggregate intrinsic value of stock options vested and expected to vest as of July 29, 2023 was $13.1 million[96] - Restricted stock awards vested during the six months ended July 29, 2023 had a total intrinsic value of $27.7 million[99] - Performance stock unit awards vested during the six months ended July 29, 2023 had a total intrinsic value of $5.5 million[101] Inventory and Sales - Merchandise inventories stood at $1.161 billion as of July 29, 2023, down from $1.182 billion at January 28, 2023[26] - Merchandise inventories increased by $20,460 thousand, compared to a decrease of $245,687 thousand in the prior year[28] - Inventory decreased to $1,161.5 million at July 29, 2023, from $1,266.7 million at July 30, 2022, primarily due to decreased reserve inventory[162] - Net sales improved by $186.6 million, or 9.4%, to $2,170.4 million during the second quarter of Fiscal 2023, driven by a 4% increase in comparable store sales and the net sales of 62 new stores[166] - Net sales increased by $393.7 million (10.1%) in the first half of Fiscal 2023, driven by a 4% increase in comparable store sales and the addition of 62 net new stores[180] - Sales are seasonally higher in the second half of the year, driven by back-to-school and holiday seasons[127] - Weather patterns continue to influence sales, with cold weather in Fall and warm weather in early Spring driving higher sales[128] Expenses and Costs - Depreciation and amortization expenses increased to $143,662 thousand from $134,274 thousand year-over-year[28] - Stock-based compensation expense increased to $36,147 thousand from $33,878 thousand year-over-year[28] - Unrealized losses on interest rate derivative contracts, net of related taxes, were $6.769 million for the period ending July 30, 2022[38] - The company incurred $0.1 million in fees related to the Term Loan Facility amendment, primarily for legal fees[55] - Impairment charges on long-lived assets were $2.3 million in Q2 2023, related to declines in revenue and operating results for eight stores[75] - Depreciation and amortization expense increased to $143.7 million in the first half of Fiscal 2023 from $134.3 million in the first half of Fiscal 2022, driven by capital expenditures related to the supply chain and new stores[187] - Impairment charges on long-lived assets were $5.6 million in the first half of Fiscal 2023, related to unrecoverable fixed assets at ten underperforming stores[188] - Income tax expense increased to $21.7 million in the first half of Fiscal 2023 from $5.5 million in the first half of Fiscal 2022, with an effective tax rate of 25.4% compared to 16.4% in the prior year[192] - Selling, general and administrative expenses increased by $89.8 million (13.1%) in Q2 Fiscal 2023, primarily due to higher product sourcing costs, store-related costs, and marketing costs[169] - Selling, general and administrative expenses increased by $165.1 million (12.1%) in the first half of Fiscal 2023, primarily driven by higher product sourcing costs[185] Operational Metrics - The company operated 939 retail stores as of July 29, 2023[30] - Fiscal 2023 is a 53-week year ending February 3, 2024, compared to a 52-week year in Fiscal 2022[34] - The company had purchase commitments of $1,301.2 million for goods not yet received as of July 29, 2023[104] - The company opened 22 new stores, including 5 relocations, and closed 5 stores during the six months ended July 29, 2023, bringing the total store count to 939[115] - The company plans to carry less inventory in stores to drive faster turns and lower markdowns, while improving the customer shopping experience[116] - The company aims to expand its retail store base to 2,000 stores in the long term by focusing on market opportunities and smaller store prototypes[118] - The company intends to increase operating margins by improving operational flexibility and optimizing markdowns[119] - The company plans to expand its store footprint and buying offices to capture incremental buying opportunities and realize economies of scale[120] - The company is focusing on tighter expense control and process improvements to drive operating leverage and efficiency savings[120] - Prolonged inflationary pressures are negatively impacting the discretionary spending of the company's core low-income customers[122] - The company has identified variable costs that could be reduced to mitigate the impact of potential extended declines in net sales[126] - The company faces margin pressure due to increased competition and the need to offer brand-name merchandise at discounted prices[129] Gross Margin and Cost of Sales - Gross margin as a percentage of net sales increased to 41.7% for the three months ended July 29, 2023, compared to 38.9% in the same period in 2022, driven by decreased freight costs and increased merchandise margins[154] - Cost of sales as a percentage of net sales decreased to 58.3% in Q2 Fiscal 2023 from 61.1% in Q2 Fiscal 2022, driven by decreased freight and increased merchandise margins[167] - Cost of sales as a percentage of net sales decreased to 58.0% in the first half of Fiscal 2023 from 60.1% in the first half of Fiscal 2022, primarily due to decreased freight costs and higher merchandise margins[181] - Product sourcing costs increased by approximately 50 basis points as a percentage of net sales during the three months ended July 29, 2023[154] Comparable Store Sales - Comparable store sales increased by 4% for both the three and six months ended July 29, 2023, compared to a decrease of 17% in the same periods in 2022[160] Adjusted Metrics - Adjusted EBIT increased by $25.1 million to $67.7 million for the three months ended July 29, 2023, compared to the same period in the prior year[150] Store Payroll - Store payroll as a percentage of net sales was 8.3% for the three months ended July 29, 2023, compared to 8.2% in the same period in 2022[163] Interest Rate Derivatives - Net unrealized gain on interest rate derivative contracts was $8.465 million for the three months ended July 29, 2023[22] - Unrealized gains from interest rate derivatives before taxes were $11.6 million for the three months ended July 29, 2023[69]