10-QPeriod: Q2 FY2016

Burlington Stores, Inc. Quarterly Report for Q2 Ended Aug 1, 2015

Filed August 31, 2015For Securities:BURL

Summary

Burlington Stores, Inc. reported a net income of $10.9 million for the three months ended August 1, 2015, a significant improvement from a net loss of $6.5 million in the same period last year. This turnaround was driven by a 9.6% increase in net sales, reaching $1.14 billion, boosted by a comparable store sales increase of 5.6%. The company also saw an improvement in gross margin to 39.2% from 38.2%, despite higher product sourcing costs. For the first six months of the fiscal year, net sales grew by 7.2% to $2.33 billion, with comparable store sales up 3.1%, and net income rose to $36.6 million from $5.3 million in the prior year. The company continues to focus on driving comparable store sales through enhancing its off-price model, sharpening its focus on its core female customer, and improving the overall customer experience. Expansion remains a priority, with plans to open approximately 25 net new stores annually. Financially, the company ended the period with $27.2 million in cash and cash equivalents and has an available $329.6 million under its ABL Line of Credit, indicating a stable liquidity position. The company also announced a $200 million share repurchase program. Despite positive operational and financial trends, the company faces ongoing legal challenges, particularly a potential material penalty from a California consumer privacy lawsuit, which adds an element of uncertainty.

Financial Highlights

48 data points
Beta

Revenue

$1.14B

39.2% Gross Margin

Net Income

$10.90M

1.0% Net Margin

EPS (Diluted)

$0.14

Total Assets

$2.66B

Cash & Equivalents

$27.23M

Free Cash Flow

-$17.70M

Financial Statements
Beta
Revenue$1.14B
Cost of Revenue$695.91M
Gross Profit$448.30M
SG&A Expenses$381.61M
Operating Expenses$1.13B
Net Income$10.90M
EPS (Basic)$0.14
EPS (Diluted)$0.14
Shares Outstanding (Basic)75.18M
Shares Outstanding (Diluted)76.51M

Key Highlights

  • 1Net income turned positive at $10.9 million for Q2 FY2015, compared to a net loss of $6.5 million in Q2 FY2014.
  • 2Net sales increased by 9.6% to $1.14 billion in Q2 FY2015, driven by a 5.6% comparable store sales increase.
  • 3Gross margin improved to 39.2% in Q2 FY2015 from 38.2% in Q2 FY2014.
  • 4For the first six months of FY2015, net sales grew 7.2% to $2.33 billion, with a 3.1% comparable store sales increase.
  • 5The company plans to open approximately 25 net new stores annually.
  • 6Burlington announced a $200 million share repurchase program on June 9, 2015.
  • 7The company ended the period with $27.2 million in cash and cash equivalents and has access to a $600 million ABL Line of Credit, with $329.6 million available.

Frequently Asked Questions

The improved performance was primarily driven by a significant increase in net sales, up 9.6% to $1.14 billion, fueled by a strong comparable store sales increase of 5.6%. This top-line growth, combined with an improvement in gross margin to 39.2% from 38.2% due to reduced markdowns and lower freight costs, led to a net income of $10.9 million, a substantial turnaround from the net loss in the prior year's comparable quarter. Enhanced operational efficiencies, particularly in store payroll and occupancy costs as a percentage of net sales, also contributed to the positive results.

Burlington plans to continue its growth by opening approximately 25 net new stores annually, adhering to a disciplined real estate strategy focused on attractive unit economics. The company is also investing in initiatives to enhance comparable store sales by improving its off-price model, focusing on its core female customer, and enhancing the in-store customer experience. Additionally, the company is increasing its e-commerce sales. The company believes that cash generated from operations, along with its existing cash and ABL Line of Credit, will be sufficient to fund its planned capital expenditures and operational initiatives. Furthermore, a $200 million share repurchase program, authorized in June 2015, is in place.

The most significant disclosed legal risk is a potential material penalty related to a California consumer privacy lawsuit (Song Beverly Credit Card Act). While the company has filed a motion based on a recent favorable appellate court decision, the Superior Court's tentative view suggests the case may proceed. The company is unable to estimate the range of the potential loss in excess of amounts accrued, and the outcome could have a material adverse effect on its results of operations. Financially, the company carries substantial debt, with $1.35 billion in total debt as of August 1, 2015, and its ability to service this debt depends on future performance and economic conditions.