Burlington Stores(BURL) - 2025 Q1 - Quarterly Report

Part I Financial Statements The company reported a net income of $78.5 million for the quarter ended May 4, 2024, a significant increase from $32.7 million in the prior-year period, driven by a 10.5% rise in net sales to $2.36 billion Q1 Fiscal 2024 Key Financial Results (in thousands, except per share data) | Metric | Three Months Ended May 4, 2024 | Three Months Ended April 29, 2023 | | :--- | :--- | :--- | | Net Sales | $2,357,318 | $2,132,793 | | Net Income | $78,514 | $32,748 | | Diluted EPS | $1.22 | $0.50 | Key Balance Sheet Data (in thousands) | Metric | May 4, 2024 | April 29, 2023 | | :--- | :--- | :--- | | Total Assets | $7,695,252 | $7,003,879 | | Total Liabilities | $6,663,826 | $6,202,405 | | Total Stockholders' Equity | $1,031,426 | $801,474 | Cash Flow Summary (in thousands) | Metric | Three Months Ended May 4, 2024 | Three Months Ended April 29, 2023 | | :--- | :--- | :--- | | 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) | Notes to Condensed Consolidated Financial Statements This section details significant accounting policies, equity changes, debt, derivatives, and other commitments supporting the consolidated financial statements Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 performance to a 10.5% increase in net sales and improved gross margin, while focusing on strategic initiatives and store expansion - Net sales increased by 10.5% to $2.36 billion in Q1 2024, primarily due to a 2% increase in comparable store sales and sales from 88 net new stores opened since Q1 2023[104] - Gross margin rate increased to 43.5% from 42.3% in the prior year, driven by higher merchandise margins and reduced freight costs[35] Reconciliation of Net Income to Adjusted Net Income (in thousands) | Description | Three Months Ended May 4, 2024 | Three Months Ended April 29, 2023 | | :--- | :--- | :--- | | 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 | - The company plans to open approximately 100 net new stores in Fiscal 2024 and expects to average this pace through Fiscal 2028, aiming for a long-term total of 2,000 stores[16][299] Ongoing Initiatives for Fiscal 2024 The company's key initiatives for Fiscal 2024 focus on driving comparable store sales growth, expanding the retail store base, and enhancing operating margins - To drive sales, the company is focusing on chasing sales trends, operating with leaner inventories, and investing in merchandising capabilities to improve vendor relationships and merchandise buys[269][15] - Real estate strategy involves averaging about 100 net new stores per year through Fiscal 2028, with a long-term goal of 2,000 stores, while also enhancing the experience in existing stores through relocations and downsizes[16] - Margin enhancement initiatives include optimizing markdowns through better inventory turns, improving supply chain efficiency to lower freight costs, and challenging expenses to drive operating leverage[17][272] Key Performance and Non-GAAP Measures Management uses key metrics and non-GAAP measures like Adjusted Net Income and Adjusted EBITDA to assess performance and provide transparency Reconciliation of Net Income to Adjusted EBIT and Adjusted EBITDA (in thousands) | Description | Three Months Ended May 4, 2024 | Three Months Ended April 29, 2023 | | :--- | :--- | :--- | | 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 | Change in Comparable Store Sales | Fiscal Quarter Ended | Change in Comparable Store Sales | | :--- | :--- | | May 4, 2024 | 2% | | April 29, 2023 | 4% | Results of Operations For Q1 Fiscal 2024, net sales increased 10.5% to $2.36 billion, with improved gross margin and reduced SG&A expenses leading to a more than doubled net income Condensed Consolidated Statements of Income as a Percentage of Net Sales | Item | % of Net Sales (Q1 2024) | % of Net Sales (Q1 2023) | | :--- | :--- | :--- | | Net sales | 100.0% | 100.0% | | Cost of sales | 56.5% | 57.7% | | Selling, general and administrative expenses | 35.0% | 35.4% | | Income before income tax expense | 4.7% | 2.1% | | Net income | 3.4% | 1.6% | - SG&A expenses decreased as a percentage of sales primarily due to a 100 basis point improvement in product sourcing costs from supply chain initiatives, partially offset by increased store-related costs[287] - Impairment charges on long-lived assets were $8.2 million in Q1 2024, related to a sale-leaseback transaction, compared to $0.8 million in Q1 2023[40] - The effective tax rate for Q1 2024 was 28.4%, up from 24.4% in Q1 2023, mainly due to higher tax expense from stock-based compensation alongside higher pre-tax income[42] Liquidity and Capital Resources The company maintains a strong liquidity position with $742.3 million in cash and $779.1 million available under its ABL Line of Credit, while projecting $750 million in capital expenditures for Fiscal 2024 - Net cash from operating activities improved to a provision of $49.4 million in Q1 2024 from a use of $78.0 million in Q1 2023, driven by improved sales, gross margin, and working capital changes[295] - Fiscal 2024 capital expenditures are estimated at approximately $750 million, net of landlord allowances, with funds allocated to new stores, remodels, supply chain, and IT initiatives[75] - During Q1 2024, the company repurchased 312,238 shares for $63.4 million. As of May 4, 2024, $441.7 million remained available under the share repurchase authorization[117] Debt Obligations as of May 4, 2024 (in millions) | Instrument | Obligation | | :--- | :--- | | Term Loan Facility | $931.2 | | 2025 & 2027 Convertible Notes | $453.2 | | ABL Line of Credit | $0 | | Finance lease obligations | $27.3 | Quantitative and Qualitative Disclosures About Market Risk There were no material changes to the company's quantitative and qualitative disclosures about market risk from its Fiscal 2023 Annual Report on Form 10-K - There were no material changes to the company's disclosures about market risk from those in the Fiscal 2023 10-K[89] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of May 4, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of May 4, 2024, the principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures were effective[120] - No changes occurred during the quarter ended May 4, 2024, that materially affected or are reasonably likely to materially affect the company's internal control over financial reporting[62] Part II—Other Information Legal Proceedings The company is involved in various legal actions, including class actions, but management believes these will not materially adversely affect its financial condition or operations - The company is involved in various lawsuits and regulatory proceedings, including class actions for alleged labor statute violations, but does not expect them to have a material adverse effect on its financial position[110][233] Risk Factors There have been no material changes in the company's risk factors from those disclosed in its Fiscal 2023 Annual Report on Form 10-K - No material changes have occurred in the company's risk factors since the filing of the Fiscal 2023 10-K[92] Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended May 4, 2024, the company repurchased 312,238 shares of common stock, with $441.7 million remaining under its authorization Issuer Purchases of Equity Securities (Q1 2024) | Month | Total Number of Shares Purchased | Average Price Paid Per Share | Dollar Value of Shares Remaining Under Program (in thousands) | | :--- | :--- | :--- | :--- | | Feb 4 - Mar 2, 2024 | 49,326 | $197.61 | $495,337 | | Mar 3 - Apr 6, 2024 | 134,554 | $217.35 | $466,092 | | Apr 7 - May 4, 2024 | 128,358 | $190.15 | $441,684 | | Total | 312,238 | | | Other Information Jennifer Vecchio, Group President and Chief Merchandising Officer, adopted a Rule 10b5-1 trading plan for up to 5,923 shares, with no other director or officer adopting, modifying, or terminating a trading arrangement during the quarter - Jennifer Vecchio, Group President and Chief Merchandising Officer, adopted a Rule 10b5-1 trading plan on March 27, 2024, for the potential sale of up to 5,923 shares[95] - No other director or officer adopted, modified, or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three-month period[68] Exhibits This section lists the exhibits filed with the quarterly report, including the Amended and Restated Certificate of Incorporation and required certifications from the CEO and CFO - The report includes required certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[126]