How did Burlington perform in Q4 fiscal 2023 relative to its own guidance?

Burlington beat guidance on the key metrics. Comparable store sales rose 2% against guidance of -2% to 0%. Adjusted EBIT margin expanded 110 bps against guidance of 0 to 40 bps. Adjusted EPS of $3.69 exceeded the $3.10 to $3.25 range. These figures are on a non-GAAP 13-week basis, excluding about $4 million of after-tax expenses tied to the Bed Bath & Beyond lease acquisition.

What is the fiscal 2024 earnings outlook?

Management guided to adjusted EPS of $7.00 to $7.60 on about 64 million diluted shares. The outlook assumes total sales growth of 9% to 11%, comparable store sales growth of 0% to 2%, an adjusted EBIT margin increase of 10 to 50 bps, an adjusted effective tax rate of about 27%, and net interest expense of about $43 million. Adjusted EPS excludes about $0.11 of after-tax Bed Bath & Beyond lease expenses. Management did not provide a GAAP reconciliation, citing unreasonable effort, and noted that some adjustments could be significant.

Why do the GAAP and adjusted results differ so much, and how should investors interpret the 53-week year?

Fiscal 2023 included a 53rd week, so GAAP figures for the 14-week quarter and 53-week year are inflated relative to comparable periods. GAAP net income for the full year was $340 million, or $5.23 per diluted share. Adjusted metrics exclude items such as net favorable lease costs, debt extinguishment losses, impairments, and litigation charges, and the company presents 13-week and 52-week comparisons to show underlying trends. Investors should focus on the 52-week and 13-week figures when assessing growth, and recognize that the adjustments are management-defined and not directly comparable with other retailers.

How is Burlington’s balance sheet and capital allocation positioned?

Liquidity totaled $1.63 billion at year-end, including $925 million in unrestricted cash and $709 million of ABL availability, with no ABL borrowings. Total debt was $1.41 billion, including $937 million of term loan debt and $453 million of convertible notes. Q4 buybacks were $103 million, and $500 million remains on the share repurchase authorization through August 2025. Fiscal 2023 operating cash flow was $869 million against $493 million of capital expenditures.

What are the main risks and long-term targets management highlighted?

Management cited uncertainty in the external environment and said it is planning flexibly, with the ability to accelerate buying if sales trend stronger. The forward-looking statements cite risks including economic conditions such as inflation, consumer spending, competition from e-commerce and major retailers, tariffs and trade policy, supply chain disruption, and the ability to execute the opportunistic buying model. On the positive side, management reiterated a potential $16 billion in total sales and $1.6 billion in adjusted operating income within five years, and it highlighted the growth opportunity from the Bed Bath & Beyond lease pipeline.

BURL 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed March 7, 2024. Cited figures are marked; the original filing is the authoritative source.

Burlington Stores reported fourth-quarter and full-year fiscal 2023 results that beat its own guidance, and it introduced fiscal 2024 outlook.

On a non-GAAP 13-week basis, comparable store sales rose 2%, above the -2% to 0% guidance, and adjusted EBIT margin expanded 110 basis points, well above the 0 to 40 basis point guidance. Adjusted EPS grew 25% to $3.69^a, versus guidance of $3.10 to $3.25. On a GAAP 14-week basis, Q4 net sales were $3.12 billion (up 14%), net income was $227 million, and diluted EPS was $3.53.

For the full year on a 52-week basis, comparable store sales grew 4%, adjusted operating margin improved 130 basis points, and adjusted EPS rose 46% to $6.24^b. Management also cited reaching its 1,000th store and strengthening the new-store pipeline through the Bed Bath & Beyond lease acquisition. For fiscal 2024, management guided to adjusted EPS of $7.00 to $7.60, an increase of 12% to 22%, on total sales growth of 9% to 11% and comparable store sales growth of 0% to 2%.

Guidance also calls for roughly 100 net new stores, about $750 million^c of net capex, and an adjusted EBIT margin increase of 10 to 50 basis points. The first-quarter outlook is adjusted EPS of $0.95 to $1.10, against $0.84 last year. Management reiterated a long-term target of $16 billion in total sales and $1.6 billion in adjusted operating income within five years.

The company is planning conservatively given macro uncertainty, while stating it is ready to chase demand if the sales trend improves. The balance sheet and capital return position look solid. Liquidity was $1.63 billion^d, including $925 million of unrestricted cash and $709 million of ABL availability, against $1.41 billion of total debt.

Merchandise inventories fell 8% to $1.09 billion, and reserve inventory dropped to 39% of the total from 48%, which supports cleaner inventory and margin quality. The company repurchased $103 million of stock in Q4, leaving $500 million on its authorization through August 2025. Investors should note that most headline profit metrics are non-GAAP, and that the fiscal 2023 results include a 53rd week that inflates GAAP comparisons.

02—Key points

Key Highlights

Q4 FY23 comparable store sales rose 2% (13-week basis), beating guidance of -2% to 0%; adjusted EBIT margin expanded 110 bps, versus guidance of 0 to 40 bps.
Q4 adjusted EPS was $3.69 (up 25% from $2.96), above the $3.10 to $3.25 guidance; GAAP diluted EPS was $3.53 on a 14-week basis.
Q4 gross margin rose 190 bps to 42.6% on a 13-week basis, driven by 140 bps of merchandise margin improvement and 50 bps of freight improvement.
FY23 (52-week basis) adjusted EPS rose 46% to $6.24, with comparable store sales up 4% and adjusted operating margin up 130 bps.
FY24 guidance calls for adjusted EPS of $7.00 to $7.60 (12% to 22% growth), total sales growth of 9% to 11%, comparable store sales growth of 0% to 2%, and about 100 net new stores.
Inventory fell 8% to $1.09 billion, with reserve inventory down to 39% from 48%, signaling improved inventory quality and supporting margins.
Liquidity of $1.63 billion and $103 million of Q4 buybacks, with $500 million remaining on the authorization through August 2025.

03—Questions

Frequently Asked Questions

How did Burlington perform in Q4 fiscal 2023 relative to its own guidance?
Burlington beat guidance on the key metrics. Comparable store sales rose 2% against guidance of -2% to 0%. Adjusted EBIT margin expanded 110 bps against guidance of 0 to 40 bps. Adjusted EPS of $3.69 exceeded the $3.10 to $3.25 range. These figures are on a non-GAAP 13-week basis, excluding about $4 million of after-tax expenses tied to the Bed Bath & Beyond lease acquisition.
What is the fiscal 2024 earnings outlook?
Management guided to adjusted EPS of $7.00 to $7.60 on about 64 million diluted shares. The outlook assumes total sales growth of 9% to 11%, comparable store sales growth of 0% to 2%, an adjusted EBIT margin increase of 10 to 50 bps, an adjusted effective tax rate of about 27%, and net interest expense of about $43 million. Adjusted EPS excludes about $0.11 of after-tax Bed Bath & Beyond lease expenses. Management did not provide a GAAP reconciliation, citing unreasonable effort, and noted that some adjustments could be significant.
Why do the GAAP and adjusted results differ so much, and how should investors interpret the 53-week year?
Fiscal 2023 included a 53rd week, so GAAP figures for the 14-week quarter and 53-week year are inflated relative to comparable periods. GAAP net income for the full year was $340 million, or $5.23 per diluted share. Adjusted metrics exclude items such as net favorable lease costs, debt extinguishment losses, impairments, and litigation charges, and the company presents 13-week and 52-week comparisons to show underlying trends. Investors should focus on the 52-week and 13-week figures when assessing growth, and recognize that the adjustments are management-defined and not directly comparable with other retailers.
How is Burlington’s balance sheet and capital allocation positioned?
Liquidity totaled $1.63 billion at year-end, including $925 million in unrestricted cash and $709 million of ABL availability, with no ABL borrowings. Total debt was $1.41 billion, including $937 million of term loan debt and $453 million of convertible notes. Q4 buybacks were $103 million, and $500 million remains on the share repurchase authorization through August 2025. Fiscal 2023 operating cash flow was $869 million against $493 million of capital expenditures.
What are the main risks and long-term targets management highlighted?
Management cited uncertainty in the external environment and said it is planning flexibly, with the ability to accelerate buying if sales trend stronger. The forward-looking statements cite risks including economic conditions such as inflation, consumer spending, competition from e-commerce and major retailers, tariffs and trade policy, supply chain disruption, and the ability to execute the opportunistic buying model. On the positive side, management reiterated a potential $16 billion in total sales and $1.6 billion in adjusted operating income within five years, and it highlighted the growth opportunity from the Bed Bath & Beyond lease pipeline.

04—Continue

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