Burlington Stores Defies Expectations With Q2 Performance, But Caution Remains

Burlington Stores BURL shares are trading higher after the company reported better-than-expected second-quarter financial results.

Quarterly revenue grew 13% year-over-year to $2.46 billion, beating the consensus of $2.415 billion. Comparable store sales increased by 5%. Adjusted EPS rose 98% YoY to $1.24, beating the consensus of $0.95.

Gross margin was 42.8% vs. 41.7% for the quarter, an increase of 110 basis points. At the end of the quarter, merchandise inventories were $1.223 billion vs. $1.162 billion last year.

Adjusted EBITDA stood at $201.84 million vs. $140.84 million last year, with the margin expanding 171 bps to 8.2%. Adjusted SG&A was 27.1% of net sales vs. 27% a year ago, an increase of 10 bps.

The company ended the quarter with $1.476 billion in liquidity, comprised of $660 million in unrestricted cash and $816 million in availability on its ABL facility. The company held $1.402 billion in outstanding total debt.

During the quarter, BURL repurchased 269,508 shares of its common stock for $61 million under its share repurchase program. BURL had $380 million remaining on its current share repurchase program.

“We saw very strong margin improvement and earnings growth during the second quarter. Our Adjusted EBIT Margin and Adjusted EPS increased 160 basis points and 98%, respectively. This strong performance was driven by the ahead of plan sales, as well as a significant increase in gross margin, and faster than expected progress in our supply chain efficiency initiatives,” commented Michael O’Sullivan, CEO.

“Based on our year-to-date performance, we are increasing our margin and earnings guidance for the full year, despite some incremental cost pressure from ocean freight. That said, there are some risks, so we are planning our business cautiously, and maintaining our comparable store sales guidance of 0% to 2% growth for the second half. As we did during the second quarter, we will chase if the underlying sales trend is stronger,” added O’Sullivan.

Q3 Outlook: Burlington expects YoY sales growth of 10%- 12% and assumes comparable store sales to increase between 0% and 2%. The company sees adjusted EPS of $1.45 – $1.55 versus the consensus of $1.36.

2024 Outlook, updated: Burlington expects sales growth of 9% – 10% (prior view 8%- 10%), equaling to a sales guidance of $10.6 billion – $10.7 billion vs $10.6 billion estimate and assumes comparable store sales will increase by 2% to 3%.

The company raised its adjusted EPS guidance to $7.66 – $7.96 from $7.35 – $7.75, compared to the $7.69 consensus.

Price Action: BURL shares traded higher by 3.04% at $281.18 premarket at the last check Thursday.

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