10-QPeriod: Q3 FY2019

Burlington Stores, Inc. Quarterly Report for Q3 Ended Nov 3, 2018

Filed November 28, 2018For Securities:BURL

Summary

Burlington Stores, Inc. reported strong performance in the third quarter and first nine months of fiscal year 2018, with significant increases in revenue and net income compared to the prior year. Total revenues for the third quarter grew by 13.7% to $1.64 billion, driven by a 4.4% increase in comparable store sales. For the nine-month period, total revenues rose 12.1% to $4.65 billion, with comparable store sales up 4.0%. Net income more than doubled year-over-year for both periods, reaching $76.8 million in Q3 and $230.4 million for the year-to-date. This growth was supported by improved gross margins and a lower effective tax rate due to the Tax Cuts and Jobs Act of 2017. The company also continued its store expansion strategy, opening 65 new stores in the first nine months of fiscal 2018. Financially, Burlington executed a debt repricing during the quarter, which lowered interest margins and extended the maturity of its ABL line of credit. While this resulted in some non-cash charges related to debt extinguishment, the company ended the period with a healthy liquidity position. The company also continued its share repurchase program, demonstrating a commitment to returning capital to shareholders. Management remains focused on driving comparable store sales, enhancing the customer experience, and optimizing operating margins through initiatives like markdowns and purchasing power enhancement.

Financial Highlights

48 data points
Beta

Revenue

$1.63B

42.4% Gross Margin

Net Income

$76.85M

4.7% Net Margin

EPS (Diluted)

$1.12

Total Assets

$3.21B

Cash & Equivalents

$85.38M

Free Cash Flow

$108.51M

Financial Statements
Beta
Revenue$1.63B
Cost of Revenue$942.01M
Gross Profit$692.48M
SG&A Expenses$538.12M
Operating Expenses$1.55B
Net Income$76.85M
EPS (Basic)$1.15
EPS (Diluted)$1.12
Shares Outstanding (Basic)66.78M
Shares Outstanding (Diluted)68.63M

Key Highlights

  • 1Total revenues increased by 13.7% to $1.63 billion in Q3 FY2018 compared to Q3 FY2017.
  • 2Comparable store sales grew by 4.4% in Q3 FY2018 on a shifted basis.
  • 3Net income surged by 71.3% to $76.8 million in Q3 FY2018 year-over-year.
  • 4Gross margin improved to 42.4% in Q3 FY2018 from 42.2% in Q3 FY2017.
  • 5Selling, general, and administrative expenses as a percentage of net sales improved to 32.9% in Q3 FY2018 from 33.4% in Q3 FY2017.
  • 6The company opened 65 new stores (including 12 relocations) in the first nine months of FY2018, ending with 679 stores.
  • 7The effective tax rate decreased significantly due to the Tax Cuts and Jobs Act of 2017.

Frequently Asked Questions

For the three months ended November 3, 2018, Burlington Stores reported comparable store sales growth of 4.4% on a shifted basis, indicating an increase in sales from existing stores.

Burlington Stores repriced its senior secured term loan facility in November 2018, which reduced interest rate margins and extended the ABL line of credit's maturity. This resulted in a $0.5 million non-cash loss on extinguishment of debt and $2.4 million in costs related to debt amendments during the quarter, but is expected to lead to lower future interest expenses.

Burlington Stores continues to pursue its growth strategy, having opened 65 new stores (including 12 relocations) in the first nine months of fiscal year 2018, bringing the total to 679 stores. The company believes there is significant opportunity for further expansion in the United States, with a long-term goal of reaching 1,000 stores, while maintaining a disciplined real estate strategy focused on unit economics.

The Tax Cuts and Jobs Act of 2017, which lowered the federal statutory tax rate, significantly reduced Burlington's effective tax rate. For the third quarter of fiscal year 2018, the effective tax rate was 16.5% compared to 33.8% in the prior year period. This reduction in tax expense contributed to the substantial increase in net income.