Burlington Stores, Inc. reported that total fiscal fourth quarter sales increased 14 percent to $3.12 billion for the 14-week period ended February 3, compared to the 13-week period comprising the prior-year fourth quarter. On a 13-week basis, total sales increased 9 percent to $2.98 billion, while comparable store sales increased 2 percent.

Gross margin on a 14-week basis was $1.33 million. On a 13-week basis, the gross margin expanded by 190 basis points to 42.6 percent of sales versus a gross margin of 40.7 percent in the prior-year period. On a 13-week basis, merchandise margins increased 140 basis points and freight improved by 50 basis points.

Product sourcing costs, which are included in selling, general and administrative expenses (SG&A), were $210 million on a 14-week basis. On a 13-week basis, product sourcing costs were $197 million versus $187 million in the prior-year Q4 period. Product sourcing costs include the costs of processing goods through the Company’s supply chain and buying costs.

SG&A was $931 million on a 14-week basis. Adjusted SG&A, on a 13-week basis, was 22.7 percent as a percentage of net sales versus 21.7 percent in the prior-year period.

The effective tax rate was 27.5 percent on a 14-week basis versus 26.2 percent during the 13-week period in the prior-year period. On a 13-week basis, the Adjusted Effective Tax Rate was 25.7 percent versus 25.3 percent in the prior-year period.

Net income was $227 million, or $3.53 per share on a 14-week basis in Q4, compared to net income of $185 million, or $2.83 per share, for the 13-week period in the prior-year period. On a 13-week basis, Adjusted Net Income, excluding approximately $4 million of expenses, net of tax, associated with the acquisition of Bed Bath & Beyond leases, was $238 million, or $3.69 per share versus $194 million, or $2.96 per share in the prior-year period.

Diluted weighted average shares outstanding amounted to 64.4 million during the fourth quarter, compared with 65.4 million during the fourth quarter of Fiscal 2022.

Adjusted EBITDA, on a 13-week basis, excluding approximately $6 million of expenses associated with the acquisition of Bed Bath & Beyond leases, was $412 million versus $342 million in the prior-year period, an increase of 130 basis points as a percentage of sales.

Adjusted EBIT, on a 13-week basis, excluding approximately $6 million of expenses associated with the acquisition of Bed Bath & Beyond leases, was $330 million versus $274 million in the prior-year period, an increase of 110 basis points as a percentage of sales.

“Our performance in the fourth quarter exceeded our guidance. On a 13-week basis, total sales increased 10 percent, comparable store sales grew 2 percent, adjusted operating margin expanded by 110 basis points, and adjusted EPS increased 25 percent,” commented Michael O’Sullivan, CEO of Burlington Stores, Inc. “This completed a strong year for our business.

Full Year Fiscal 2023 Summary

  • On a 53-week basis, total sales increased 12 percent compared to the 52-week period in the prior-year period. Net income increased 48 percent, or $110 million, to $340 million, or $5.23 per share versus $3.49 per share in the prior-year period, an increase of 50 percent.
  • On a 52-week basis, total sales increased 10 percent compared to the same period in the prior-year period. Excluding approximately $18 million of expenses associated with the acquisition of Bed Bath & Beyond leases, Adjusted EBIT increased 39 percent, or $166 million, to $596 million, Adjusted Net Income increased 44 percent, or $124 million, to $405 million, and Adjusted EPS was $6.24 versus $4.26, an increase of 46 percent.
    Inventory.
  • On a 52-week basis, comparable store sales grew 4 percent, adjusted operating margin improved 130 basis points, and adjusted EPS increased 46 percent.

“We hit a major milestone, opening our 1000th store, and we significantly strengthened our pipeline for new store openings through the previously announced acquisition of Bed Bath & Beyond leases,” O’Sullivan shared.

Inventory
Merchandise inventories at fiscal 2023 year-end were $1.09 billion versus $1.18 billion at the end of Fiscal 2022. Comparable store inventories decreased 5 percent. Reserve inventory was 39 percent of total inventory at the end of Fiscal 2023 compared to 48 percent at the end of Fiscal 2022.

Liquidity and Debt
The company ended the fourth quarter of fiscal 2023 with $1.63 billion in liquidity, comprised of $925 million in unrestricted cash and $709 million in availability on its ABL facility. The company ended the fourth quarter with $1.41 billion in outstanding total debt, including $937 million on its term loan facility, $453 million in convertible notes, and no borrowings on the ABL facility.

Common Stock Repurchases
During the fourth quarter, the company repurchased 605,311 shares of its common stock under its share repurchase program for $103 million. As of the end of the fourth quarter, the company had $500 million remaining on its current share authorization, which expires in August 2025.

Outlook

Fiscal 2024
(for 52-weeks ending February 1, 2025)

  • Total sales to increase in the range of 9 percent to 11 percent on top of the 10 percent increase for the 52-weeks ended January 27, 2024; this assumes comparable store sales will increase in the range of 0 percent to 2 percent, on top of the 4 percent increase for the 52-weeks ended January 27, 2024;
  • Capital expenditures, net of landlord allowances, to be approximately $750 million;
  • To open approximately 100 net new stores;
  • Depreciation & amortization to be approximately $350 million;
  • Adjusted EBIT margin to increase in the range of 10 basis points to 50 basis points versus the 52 weeks ended January 27, 2024; this Adjusted EBIT margin increase excludes approximately $9 million of anticipated expenses related to the acquired Bed Bath & Beyond leases in Fiscal 2024 versus $18 million incurred in Fiscal 2023;
  • Net interest expense to be approximately $43 million;
  • The Adjusted Effective Tax Rate to be approximately 27 percent; and
  • Adjusted EPS in the range of $7.00 to $7.60, which excludes 11 cents, net of tax, of anticipated expenses, associated with the acquired Bed Bath & Beyond leases. This assumes a fully diluted share count of approximately 64 million shares.

First quarter Fiscal 2024
(for 13-weeks ending May 4, 2024)

  • Comparable store sales to increase 0 percent to 2 percent, on top of the 4 percent increase during the first quarter of Fiscal 2023;
  • Adjusted EBIT margin to increase in the range of 20 to 60 basis points; this Adjusted EBIT margin increase excludes approximately $8 million of anticipated expenses related to the acquired Bed Bath & Beyond leases;
  • An Adjusted Effective Tax Rate of approximately 29 percent; and
  • Adjusted EPS in the range of 95 cents to $1.10, as compared to 84 cents of Adjusted EPS in the prior-year period; this excludes 9 cents, net of tax, of anticipated expenses related to the acquired Bed Bath & Beyond leases.

The company said it has not presented a quantitative reconciliation of the forward-looking non-GAAP financial measures set out above to their most comparable GAAP financial measures because it would require the company to create estimated ranges on a GAAP basis, which would entail unreasonable effort. Adjustments required to reconcile forward-looking non-GAAP measures cannot be predicted with reasonable certainty but may include, among others, costs related to debt amendments, loss on extinguishment of debt, and impairment charges, as well as the tax effect of such items. Some or all of those adjustments could be significant.

Image courtesy Burlington