10-QPeriod: Q3 FY2024

Burlington Stores, Inc. Quarterly Report for Q3 Ended Oct 28, 2023

Filed November 21, 2023For Securities:BURL

Summary

Burlington Stores, Inc. reported a strong third quarter for fiscal year 2023, with net sales increasing by 12.2% to $2,284.7 million, driven by a 6% rise in comparable store sales and contributions from new store openings. The company demonstrated improved profitability, with net income rising to $48.6 million from $16.8 million in the prior year quarter. This performance was supported by an expansion in gross margin to 43.2% from 41.2% a year ago, attributed to better merchandise margins and lower freight costs. For the nine-month period, net sales grew 10.8% to $6,587.9 million, with comparable store sales up 5%. Net income significantly increased to $112.2 million from $44.9 million in the prior year period. The company continued its store expansion, adding 65 new stores (including 9 relocations) during the nine-month period, bringing the total store count to 977. Burlington also successfully refinanced some of its debt by exchanging older convertible notes for new ones with a lower interest rate, incurring some extinguishment charges but improving its debt profile.

Financial Highlights

47 data points
Beta

Revenue

$2.29B

43.3% Gross Margin

Net Income

$48.55M

2.1% Net Margin

EPS (Diluted)

$0.75

Total Assets

$7.49B

Cash & Equivalents

$615.86M

Free Cash Flow

$120.68M

Financial Statements
Beta
Revenue$2.29B
Cost of Revenue$1.30B
Gross Profit$991.54M
SG&A Expenses$826.82M
Operating Expenses$2.22B
Net Income$48.55M
EPS (Basic)$0.75
EPS (Diluted)$0.75
Shares Outstanding (Basic)64.71M
Shares Outstanding (Diluted)64.80M

Key Highlights

  • 1Net sales for the third quarter increased by 12.2% to $2.28 billion, with comparable store sales up 6%.
  • 2Net income for the third quarter more than doubled, reaching $48.6 million compared to $16.8 million in the prior year.
  • 3Gross margin improved to 43.2% from 41.2% in the prior year's third quarter, driven by higher merchandise margins and reduced freight costs.
  • 4The company expanded its store footprint, opening 65 new stores (including 9 relocations) during the first nine months of the fiscal year, ending with 977 locations.
  • 5Inventory levels decreased year-over-year to $1.33 billion from $1.45 billion, reflecting better inventory management.
  • 6Burlington successfully exchanged a portion of its 2025 Convertible Notes for new 2027 Convertible Notes, reducing future interest expense despite incurring debt extinguishment charges.
  • 7The company reported strong growth in Adjusted Net Income and Adjusted EBITDA, indicating improved operational performance excluding certain charges.

Frequently Asked Questions

The significant increase in net income was primarily driven by a substantial rise in net sales, which grew by 12.2% year-over-year, coupled with an expansion in the gross margin rate. Improved merchandise margins and decreased freight costs contributed to the gross margin improvement, while higher sales volumes also helped absorb fixed costs more effectively.

Burlington has focused on operating with leaner inventories, which decreased to $1.33 billion at the end of the third quarter compared to $1.45 billion in the prior year. The company aims to improve inventory turns, reduce markdowns, and offer customers a higher mix of fresh receipts by managing inventory more effectively, including strategic use of reserve merchandise to chase sales trends.

Burlington is pursuing a market-focused and financially disciplined real estate strategy, with a long-term goal of operating 2,000 stores in the U.S. They continue to open new stores, with 65 net new openings (including relocations) in the first nine months of fiscal 2023. The company focuses on unit economics, returns, and enhancing the store experience through strategic relocations and downsizes to optimize store performance and reduce costs.

Burlington proactively managed its debt by exchanging a significant portion of its higher-interest 2025 Convertible Notes for new 2027 Convertible Notes with a lower interest rate (1.25% vs. 2.25%). While this resulted in debt extinguishment charges of $13.6 million in the third quarter and $38.3 million year-to-date, it is expected to lower future interest expenses. The company also amended its Term Loan Facility to transition from LIBOR to SOFR-based rates.