Burlington Stores(BURL) - 2025 Q1 - Quarterly Results

Executive Summary & First Quarter 2024 Highlights Q1 2024 Financial Performance (GAAP & Non-GAAP) Burlington Stores reported an 11% increase in total sales and a 2% comparable store sales increase for Q1 Fiscal 2024, with GAAP net income rising to $79 million and Adjusted EPS increasing 68% to $1.42 Q1 Fiscal 2024 Key Financial Highlights | Metric | Q1 FY24 (GAAP) | Q1 FY23 (GAAP) | Change (YoY) | Q1 FY24 (Non-GAAP) | Q1 FY23 (Non-GAAP) | Change (YoY) | | :---------------------- | :------------- | :------------- | :----------- | :----------------- | :----------------- | :----------- | | Total Sales | +11% | - | | - | - | | | Net Income | $79 million | $33 million | +139% | - | - | | | Diluted EPS | $1.22 | $0.50 | +144% | - | - | | | Comparable Store Sales | +2% | - | | - | - | | | Adjusted EBIT Margin | - | - | +170 bps | - | - | +170 bps | | Adjusted EPS | - | - | | $1.42 | $0.84 | +68% | - Comparable store sales increased 4% during March and April combined, contributing to the 2% increase for the quarter, which was at the high end of guidance[1] CEO Commentary CEO Michael O'Sullivan expressed satisfaction with Q1 sales trends, noting a strong pickup in March and April after a slow start, driven by significant margin improvement and earnings growth - Sales trends developed positively in Q1, with a slow start in February (due to weather and delayed tax refunds) followed by a pickup in March and April[1] - The company achieved substantial ahead-of-guidance margin improvement and earnings growth, driven by a significant increase in gross margin and strong leverage in supply chain expenses[24] - Management is increasing margin and earnings guidance for the year, while maintaining comparable store sales guidance of 0% to 2% growth due to external uncertainty, ready to chase stronger underlying sales trends[3] Fiscal 2024 First Quarter Operating Results Sales Performance Total sales for the first quarter of Fiscal 2024 increased by 11% year-over-year, reaching $2,357 million, while comparable store sales saw a 2% increase Q1 Fiscal 2024 Sales Performance | Metric | Q1 FY24 ($M) | Q1 FY23 ($M) | Change (YoY) | | :---------------------- | :----------- | :----------- | :----------- | | Total Sales | $2,357 | $2,132 | +11% | | Comparable Store Sales | - | - | +2% | - Total sales increased 11% compared to the first quarter of Fiscal 2023 to $2,357 million[25] - Comparable store sales increased 2% compared to the first quarter of Fiscal 2023[25] Profitability and Margins Gross margin rate improved by 120 basis points to 43.5% of net sales, driven by lower markdowns and improved freight expense, while Adjusted EBITDA and Adjusted EBIT also saw significant increases as a percentage of sales Q1 Fiscal 2024 Profitability and Margins | Metric | Q1 FY24 | Q1 FY23 | Change (YoY) | | :-------------------------- | :---------- | :---------- | :----------------------- | | Gross Margin Rate | 43.5% | 42.3% | +120 bps | | Merchandise Margin | - | - | +90 bps | | Freight Expense | - | - | +30 bps | | Adjusted EBITDA ($ million) | 217 | 157 | +180 bps (as % of sales) | | Adjusted EBIT ($ million) | 135 | 87 | +170 bps (as % of sales) | - Merchandise margin expanded by 90 basis points, primarily driven by lower markdowns[4] - Freight expense improved 30 basis points[4] Expenses Selling, general and administrative expenses (SG&A) improved by 40 basis points as a percentage of net sales, while Adjusted SG&A increased by 60 basis points, and product sourcing costs decreased slightly Q1 Fiscal 2024 Expenses | Metric | Q1 FY24 ($ million) | Q1 FY23 ($ million) | Change (YoY) | | :----------------------------- | :------------------ | :------------------ | :----------- | | SG&A (% of net sales) | 35.0% | 35.4% | -40 bps | | Adjusted SG&A (% of net sales) | 27.1% | 26.5% | +60 bps | | Product Sourcing Costs ($ million) | 183 | 187 | -$4 | - Product sourcing costs include the costs of processing goods through our supply chain and buying costs[5] Earnings Per Share (EPS) & Net Income GAAP net income significantly increased to $79 million, or $1.22 per diluted share, from $33 million, or $0.50 per share, in the prior year, with Adjusted Net Income also rising to $91 million, or $1.42 per share Q1 Fiscal 2024 Net Income and EPS | Metric | Q1 FY24 ($ million) | Q1 FY23 ($ million) | Change (YoY) | | :-------------------------- | :------------------ | :------------------ | :----------- | | Net Income (GAAP) | $79 | $33 | +139% | | Diluted EPS (GAAP) ($) | $1.22 | $0.50 | +144% | | Adjusted Net Income ($ million) | $91 | $55 | +65% | | Adjusted EPS ($) | $1.42 | $0.84 | +69% | - Adjusted Net Income excludes approximately $4 million of expenses, net of tax, associated with the acquisition of Bed Bath & Beyond leases[28] Tax Rate The effective tax rate on a GAAP basis was 28.4% for Q1 Fiscal 2024, an increase from 24.4% in the prior year, with the Adjusted Effective Tax Rate also increasing to 28.1% from 24.5% Q1 Fiscal 2024 Effective Tax Rates | Metric | Q1 FY24 | Q1 FY23 | | :-------------------------- | :------ | :------ | | Effective Tax Rate (GAAP) | 28.4% | 24.4% | | Adjusted Effective Tax Rate | 28.1% | 24.5% | - The effective tax rate increased by 400 basis points year-over-year[6] Inventory Management Merchandise inventories decreased by 7% to $1,141 million at the end of Q1 Fiscal 2024 compared to the prior year, with comparable store inventories also decreasing by 6% and reserve inventory declining to 40% of total inventory Q1 Fiscal 2024 Inventory Levels | Metric | End of Q1 FY24 ($ million) | End of Q1 FY23 ($ million) | Change (YoY) | | :-------------------------- | :------------------------- | :------------------------- | :----------- | | Merchandise Inventories | $1,141 | $1,231 | -7% | | Comparable Store Inventories| - | - | -6% | | Reserve Inventory (% of total)| 40% | 44% | -400 bps | - Reserve inventory is largely composed of merchandise purchased opportunistically for future distribution to stores[8] Liquidity and Debt The company ended Q1 Fiscal 2024 with $1,405 million in outstanding total debt and $1,521 million in total liquidity, comprising $742 million in unrestricted cash and $779 million in ABL facility availability Q1 Fiscal 2024 Liquidity and Debt | Metric | Amount ($ million) | | :-------------------------- | :----------------- | | Outstanding Total Debt | $1,405 | | Term Loan Facility | $931 | | Convertible Notes | $453 | | ABL Facility Borrowings | $0 | | Total Liquidity | $1,521 | | Unrestricted Cash | $742 | | ABL Facility Availability | $779 | - The company ended the first quarter of Fiscal 2024 with $1,521 million in liquidity[30] Capital Allocation and Outlook Common Stock Repurchases During Q1 Fiscal 2024, Burlington Stores repurchased 312,238 shares of common stock for $63 million, with $442 million remaining authorized under the current share repurchase program Q1 Fiscal 2024 Common Stock Repurchases | Metric | Amount | | :------------------------------------ | :----------- | | Shares Repurchased in Q1 FY24 | 312,238 | | Value of Shares Repurchased in Q1 FY24| $63 million | | Remaining Authorization | $442 million | - The company had $442 million remaining on its current share repurchase program authorization as of the end of Q1 Fiscal 2024[32] Fiscal Year 2024 Outlook For Fiscal Year 2024, Burlington Stores projects total sales to increase by 9% to 11%, with comparable store sales growing 0% to 2%, and Adjusted EPS expected to be in the range of $7.35 to $7.75 Full Fiscal Year 2024 Guidance | Metric | Guidance Range/Estimate | | :-------------------------- | :---------------------- | | Total Sales Increase | 9% to 11% | | Comparable Store Sales Increase | 0% to 2% | | Adjusted EPS ($) | $7.35 to $7.75 | | YoY Increase (vs. FY23 $6.24) | 18% to 24% | | Capital Expenditures (net) ($ million) | ~$750 | | Depreciation & Amortization ($ million) | ~$350 | | Net Interest Expense ($ million) | ~$43 | | Adjusted Effective Tax Rate | ~26% | | Net New Stores | ~100 | | Adjusted EBIT Margin Increase | 40 to 60 bps | - Adjusted EPS guidance excludes $0.10, net of tax, of expenses associated with acquired Bed Bath & Beyond leases[10] - Adjusted EBIT margin increase excludes approximately $9 million of anticipated expenses related to acquired Bed Bath & Beyond leases in Fiscal 2024[33] Second Quarter 2024 Outlook For the second quarter of Fiscal 2024, the company expects Adjusted EBIT margin to increase by 30 to 50 basis points and Adjusted EPS to be in the range of $0.83 to $0.93 Second Quarter Fiscal 2024 Guidance | Metric | Guidance Range/Estimate | | :-------------------------- | :---------------------- | | Adjusted EBIT Margin Increase | 30 to 50 bps | | Adjusted EPS ($) | $0.83 to $0.93 | | vs. Q2 FY23 Adjusted EPS ($) | $0.63 | - Both periods for Adjusted EPS guidance exclude $0.03, net of tax, of expenses related to the acquired Bed Bath & Beyond leases[34] Company Information & Disclosures About Burlington Stores, Inc. Burlington Stores, Inc. is a nationally recognized off-price retailer operating 1,021 stores across 46 states, Washington D.C., and Puerto Rico, offering a wide selection of in-season, fashion-focused merchandise at significant discounts - Burlington Stores is a Fortune 500 company, traded on the NYSE under 'BURL'[38] - As of the end of Q1 Fiscal 2024, the company operated 1,021 stores[38] - Stores offer merchandise at up to 60% off other retailers' prices, including apparel, footwear, accessories, home goods, and more[38] Conference Call Details Burlington Stores held a conference call on May 30, 2024, to discuss its first-quarter results, with details provided for live participation and replay access - A live webcast of the conference call was available on the investor relations page of the company's website at www.burlingtoninvestors.com[37](index=37&type=chunk) - A replay was available from May 30, 2024, through June 6, 2024, via U.S. toll-free and international dial-in numbers[13] Safe Harbor for Forward-Looking Statements This section contains a disclaimer regarding forward-looking statements, emphasizing that they are subject to risks and uncertainties that could cause actual results to differ materially, and the company does not undertake to publicly update or revise them - Forward-looking statements are identified by not relating strictly to historical or current facts and discuss expectations for financial condition, results of operations, plans, objectives, future performance, and business[49] - All forward-looking statements are subject to risks and uncertainties, including general economic conditions, competitive factors, seasonal fluctuations, and the impact of public health crises[49] - 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[49] Investor Relations Contacts Contact information for investor relations inquiries is provided, including names and contact details - Investor Relations Contacts: David J. Glick, Daniel Delrosario, Allison Malkin (ICR, Inc.)[39][60] - Contact email: Info@BurlingtonInvestors.com[39] Financial Statements (Unaudited) Condensed Consolidated Statements of Income The unaudited Condensed Consolidated Statements of Income present the company's revenues, costs, and net income for the three months ended May 4, 2024, and April 29, 2023, showing significant year-over-year growth in net sales and net income Condensed Consolidated Statements of Income (Unaudited) | Metric | Three Months Ended May 4, 2024 ($ thousands) | Three Months Ended April 29, 2023 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :---------------------------------------------- | | Net sales | 2,357,318 | 2,132,793 | | Total revenue | 2,361,553 | 2,136,956 | | Cost of sales | 1,330,726 | 1,231,646 | | Selling, general and administrative expenses | 825,226 | 755,628 | | Depreciation and amortization | 81,965 | 70,529 | | Income before income tax expense | 109,639 | 43,318 | | Income tax expense | 31,125 | 10,570 | | Net income | 78,514 | 32,748 | | Diluted net income per common share ($) | $1.22 | $0.50 | | Weighted average common shares - diluted | 64,267 | 65,291 | - Net sales increased by $224.5 million, or 10.5%, from $2,132,793 thousand in Q1 FY23 to $2,357,318 thousand in Q1 FY24[41] - Net income more than doubled, from $32,748 thousand in Q1 FY23 to $78,514 thousand in Q1 FY24[41] Condensed Consolidated Balance Sheets The unaudited Condensed Consolidated Balance Sheets provide a snapshot of the company's financial position as of May 4, 2024, and February 3, 2024, and April 29, 2023, with total assets of $7,695,252 thousand and stockholders' equity of $1,031,426 thousand as of May 4, 2024 Condensed Consolidated Balance Sheets (Unaudited) | Metric | May 4, 2024 ($ thousands) | Feb 3, 2024 ($ thousands) | April 29, 2023 ($ thousands) | | :----------------------------------- | :------------------------ | :------------------------ | :--------------------------- | | Cash and cash equivalents | 742,332 | 925,359 | 532,443 | | Merchandise inventories | 1,140,800 | 1,087,841 | 1,231,092 | | Total current assets | 2,238,127 | 2,327,024 | 1,990,465 | | Total assets | 7,695,252 | 7,706,840 | 7,003,879 | | Total current liabilities | 2,097,322 | 2,028,786 | 1,718,513 | | Long term debt | 1,236,658 | 1,394,942 | 1,350,416 | | Total liabilities and stockholders' equity | 7,695,252 | 7,706,840 | 7,003,879 | | Stockholders' equity | 1,031,426 | 996,932 | 801,474 | - Merchandise inventories decreased from $1,231,092 thousand at April 29, 2023, to $1,140,800 thousand at May 4, 2024[51] - Total assets increased from $7,003,879 thousand at April 29, 2023, to $7,695,252 thousand at May 4, 2024[51] Condensed Consolidated Statements of Cash Flows The unaudited Condensed Consolidated Statements of Cash Flows detail the cash movements for the three months ended May 4, 2024, and April 29, 2023, showing net cash provided by operating activities of $49,372 thousand in Q1 FY24, a significant improvement from a net cash used of $77,952 thousand in Q1 FY23 Condensed Consolidated Statements of Cash Flows (Unaudited) | Metric | Three Months Ended May 4, 2024 ($ thousands) | Three Months Ended April 29, 2023 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :---------------------------------------------- | | Net cash provided by (used in) operating activities | 49,372 | (77,952) | | Net cash used in investing activities| (165,532) | (86,157) | | Net cash used in financing activities| (66,867) | (176,071) | | Decrease in cash, cash equivalents, restricted cash and restricted cash equivalents | (183,027) | (340,180) | | Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period | 742,332 | 539,025 | - Cash paid for property and equipment increased to $164,837 thousand in Q1 FY24 from $95,688 thousand in Q1 FY23[59] - Purchase of treasury shares increased to $75,622 thousand in Q1 FY24 from $53,393 thousand in Q1 FY23[59] Reconciliation of Non-GAAP Financial Measures Non-GAAP Definitions and Rationale This section defines various non-GAAP financial measures, including Adjusted EPS, Adjusted SG&A, Adjusted EBIT, Adjusted EBITDA, and Adjusted Effective Tax Rate, presented to provide greater transparency and facilitate comparisons of core operating results - Adjusted EPS is defined as Adjusted Net Income divided by diluted weighted average shares outstanding[20] - Adjusted EBIT is defined as net income, exclusive of interest expense/income, loss on extinguishment of debt, income tax expense, impairment charges, net favorable lease costs, and other unusual items[45] - The company believes these supplemental measures are useful for investors and management in evaluating business performance and comparing core operating results between past and future periods[36][46][55] Adjusted Net Income and Adjusted EPS Reconciliation The reconciliation table shows the adjustments made to GAAP net income to arrive at Adjusted Net Income and Adjusted EPS for the first quarters of Fiscal 2024 and 2023, including net favorable lease costs, loss on extinguishment of debt, and impairment charges Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS | Metric | Three Months Ended May 4, 2024 ($ thousands) | Three Months Ended April 29, 2023 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :---------------------------------------------- | | Net income | 78,514 | 32,748 | | Net favorable lease costs | 2,970 | 4,064 | | Loss on extinguishment of debt | — | 24,644 | | Impairment charges - long-lived assets | 8,210 | 844 | | Tax effect | (2,881) | (7,302) | | Adjusted Net Income | 86,813 | 54,998 | | Diluted weighted average shares outstanding | 64,267 | 65,291 | | Adjusted Earnings per Share ($) | $1.35 | $0.84 | - Adjusted Net Income for Q1 FY24 was $86,813 thousand, up from $54,998 thousand in Q1 FY23[47] - Adjusted EPS for Q1 FY24 was $1.35, compared to $0.84 in Q1 FY23[47] Adjusted EBIT and Adjusted EBITDA Reconciliation This reconciliation details the adjustments from GAAP net income to Adjusted EBIT and Adjusted EBITDA for the first quarters of Fiscal 2024 and 2023, primarily by adding back interest expense, income tax expense, depreciation and amortization, and other non-operating or non-recurring items Reconciliation of Net Income to Adjusted EBIT and Adjusted EBITDA | Metric | Three Months Ended May 4, 2024 ($ thousands) | Three Months Ended April 29, 2023 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :---------------------------------------------- | | Net income | 78,514 | 32,748 | | Interest expense | 16,649 | 19,345 | | Interest income | (8,072) | (5,459) | | Net favorable lease costs | 2,970 | 4,064 | | Loss on extinguishment of debt | — | 24,644 | | Impairment charges - long-lived assets | 8,210 | 844 | | Income tax expense | 31,125 | 10,570 | | Adjusted EBIT | 129,396 | 86,756 | | Depreciation and amortization | 81,965 | 70,529 | | Adjusted EBITDA | 211,361 | 157,285 | - Adjusted EBIT increased from $86,756 thousand in Q1 FY23 to $129,396 thousand in Q1 FY24[47] - Adjusted EBITDA increased from $157,285 thousand in Q1 FY23 to $211,361 thousand in Q1 FY24[47] Adjusted SG&A Reconciliation The reconciliation of SG&A to Adjusted SG&A for the first quarters of Fiscal 2024 and 2023 shows adjustments for net favorable lease costs and product sourcing costs, with Adjusted SG&A for Q1 FY24 at $638,942 thousand Reconciliation of SG&A to Adjusted SG&A | Metric | Three Months Ended May 4, 2024 ($ thousands) | Three Months Ended April 29, 2023 ($ thousands) | | :----------------------------------- | :------------------------------------------- | :---------------------------------------------- | | SG&A | 825,226 | 755,628 | | Net favorable lease costs | (2,970) | (4,064) | | Product sourcing costs | (183,314) | (186,926) | | Adjusted SG&A | 638,942 | 564,638 | - Adjusted SG&A increased from $564,638 thousand in Q1 FY23 to $638,942 thousand in Q1 FY24[47] Adjusted Effective Tax Rate Reconciliation This section provides the reconciliation of the GAAP effective tax rate to the Adjusted Effective Tax Rate for the first quarters of Fiscal 2024 and 2023, along with footnotes explaining the nature of the adjustments Reconciliation of Effective Tax Rates | Metric | Three Months Ended May 4, 2024 | Three Months Ended April 29, 2023 | | :----------------------------------- | :----------------------------- | :-------------------------------- | | Effective tax rate on a GAAP basis | 28.4% | 24.4% | | Adjustments to arrive at Adjusted Effective Tax Rate | (0.3)% | 0.1% | | Adjusted Effective Tax Rate | 28.1% | 24.5% | - Adjustments to arrive at Adjusted Effective Tax Rate include the tax effect of net favorable lease costs, loss on extinguishment of debt, impairment charges, and litigation matters[57] - The Adjusted Effective Tax Rate for Q1 FY24 was 28.1%, compared to 24.5% in Q1 FY23[48]