Burlington Stores Inc. reported profits on an adjusted basis rose 46.2 percent in the second quarter ended July 31 and sales grew 34 percent compared to the second quarter of 2019.

Michael O’Sullivan, CEO, stated, “We are pleased with our second-quarter results, which showed continued strong momentum in sales growth and margin expansion. Once again, we demonstrated our improved ability to chase the trend through our Burlington 2.0 strategies. We are getting stronger as a business and as a team.”

O’Sullivan continued, “The environment remains uncertain, and the trend is difficult to predict. We will continue to manage our business flexibly so we can chase the trend or pull back if necessary. In addition, we are seeing a huge imbalance between supply and demand in global logistics systems. This is driving up freight and supply chain expenses and it will put significant pressure on our margins for the balance of the year.”

O’Sullivan concluded, “Looking further out, we remain very excited by the market share opportunities ahead of us. Our 34 percent total sales growth year-to-date reinforces our confidence in this opportunity. Meanwhile, we believe that many of the prevailing expense headwinds are being driven by short-term market conditions. We continue to expect significant margin expansion, as these conditions normalize, over the next few years.”

The off-pricer said that given the volatility in Fiscal 2020 results caused by COVID-19 and to assist with comparability, all second quarter and first six months Fiscal 2021 comparisons are made versus the second quarter and first six months of Fiscal 2019.

Fiscal 2021 Second Quarter Operating Results
(for the 13-week period ended July 31, 2021 compared with the 13-week period ended August 3, 2019)

  • Total sales increased 34 percent compared to the second quarter of Fiscal 2019 to $2,213 million, while comparable-store sales increased 19 percent compared to the second quarter of Fiscal 2019.
  • Gross margin rate was 42.2 percent vs. 41.4 percent for the second quarter of Fiscal 2019, an increase of 80 basis points.
  • Product sourcing costs, which are included in selling, general and administrative expenses (SG&A), were $146 million vs. $82 million in the second quarter of Fiscal 2019. Product sourcing costs include the costs of processing goods through our supply chain and buying costs.
  • SG&A was 31.7 percent as a percentage of net sales versus 32.1 percent in the second quarter of Fiscal 2019. Adjusted SG&A was 24.9 percent as a percentage of net sales versus 26.6 percent in the second quarter of Fiscal 2019, an improvement of 170 basis points.
  • The effective tax rate was 17.1 percent versus 11.6 percent in the second quarter of Fiscal 2019. The Adjusted Effective Tax Rate was 19.6 percent versus 12.8 percent in the second quarter of Fiscal 2019.
  • Net income increased 21 percent to $103 million, or $1.50 per share versus $85 million, or $1.26 per share for the second quarter of Fiscal 2019, and Adjusted Net Income was $133 million, or $1.94 per share vs. $91 million, or $1.36 per share for the second quarter of Fiscal 2019.
  • Fully diluted shares outstanding amounted to 68.4 million at the end of the quarter compared with 67.3 million at the end of the second quarter of Fiscal 2019.
  • Adjusted EBITDA increased 44 percent from the second quarter of Fiscal 2019 to $246 million, an increase of 80 basis points as a percentage of sales. Adjusted EBIT increased 55 percent from the second quarter of Fiscal 2019 to $183 million, an increase of 110 basis points as a percentage of sales.

First Six Months Fiscal 2021 Results
Total sales increased 34 percent compared to the first six months of Fiscal 2019. Net income increased 69 percent compared to the same period in Fiscal 2019 to $274 million, or $4.01 per share versus $2.40 per share in the prior period, an increase of 67 percent. Adjusted EBIT increased 79 percent, or $185 million compared to the first six months of Fiscal 2019, to $421 million, an increase of 240 basis points as a percentage of sales. Adjusted Net Income of $309 million was up 75 percent versus the prior period, while Adjusted EPS was $4.53 vs. $2.62 in the prior-year period, an increase of 73 percent.

Inventory
Merchandise inventories were $828 million versus $824 million at the end of the second quarter of Fiscal 2019. Comparable store inventories decreased 7 percent, offset by inventory from the addition of 101 net new stores opened since the end of the second quarter of Fiscal 2019. Reserve inventory was 31 percent of total inventory at the end of the second quarter of Fiscal 2021 compared to 33 percent at the end of the second quarter of Fiscal 2019.

Liquidity
The company ended the second quarter of Fiscal 2021 with $1,878 million in liquidity, comprised of $1,344 million in unrestricted cash and $534 million in availability on its ABL facility.

Term Loan Extension
On June 24, 2021, the company completed the repricing and extension of its $961 million senior secured term loan facility, which extended the maturity from November 2024 to June 2028. The applicable interest rate margin for LIBOR loans was increased from 1.75 percent to 2.00 percent. In addition, in a related transaction, the company completed a “Blend and Extend” interest rate swap transaction on $450 million in the principal amount on the term loan facility, extending the swap’s maturity from December 2023 to June 2028. The new blended swap rate was reduced from 2.72 percent to 2.19 percent.

Share Repurchase
The company repurchased no shares during the quarter under the company’s previous share repurchase authorization which expired August 14, 2021. The company’s Board of Directors recently authorized the repurchase of up to $400 million of common stock, which is authorized to be executed through August 2023.

Outlook
Given the uncertainty surrounding the pace of the recovery of consumer demand and the ongoing COVID-19 pandemic, the company is not providing sales or earnings guidance for Fiscal 2021 (the 52-weeks ending January 29, 2022) at this time.

The company is updating the following Fiscal 2021 guidance items:

  • Capital expenditures, net of landlord allowances, is now expected to be approximately $510 million;
  • The company still expects to open 100 new stores, while relocating or closing 25 stores, for a total of 75 net new stores in Fiscal 2021;
  • Depreciation & amortization, exclusive of favorable lease costs, is now expected to be approximately $255 million;
  • Interest expense is now expected to be approximately $70 million; and
  • The effective tax rate is now expected to be approximately 22 percent to 23 percent.