Burlington Stores' Q2 Earnings Beat Estimates, Fiscal 2024 Outlook Raised

Burlington Stores, Inc. has reported impressive second-quarter fiscal 2024 results, wherein sales and earnings beat the Zacks Consensus Estimate. Also, both the bottom and top lines grew year over year. The company raised its fiscal 2024 outlook driven by robust performance.

Burlington Stores has been focusing on strategic initiatives to drive growth and profitability, including a significant expansion of its store footprint. The company is also working on optimizing its merchandise assortment by increasing the mix of better brands, which will help attract more customers and reinforce its value proposition.

Additionally, the company is enhancing its supply chain through productivity initiatives, which include modernizing its distribution centers with more automation. This focus on operational improvements, along with better inventory management resulting in faster turnover and lower markdowns, supports overall profitability.

More on Burlington Stores' Q2 Financial Results

Burlington Stores reported adjusted earnings of $1.20 per share, which surpassed the Zacks Consensus Estimate of 95 cents. The bottom line rose 100% from 60 cents in the year-ago quarter. Excluding the acquisition of Bed Bath & Beyond leases, earnings were $1.24 per share compared with 63 cents in the year-ago period.

Total revenues of $2,465.5 million increased 13.4% from the prior-year quarter and beat the Zacks Consensus Estimate of $2,421 million. The company's comparable store sales jumped 5% from the year-ago period. Net sales were $2,461.2 million and other revenues were $4.3 million.

Insight Into BURL's Margins

The gross margin was 42.8%, up 110 basis points (bps) from second-quarter fiscal 2023. We expected the gross margin to increase 60 bps year over year. The merchandise margin expanded 90 bps due to lower markdowns. Freight expenses improved 20 bps year over year driven by lower freight rates and cost savings initiatives.

Adjusted selling, general and administrative (SG&A) expenses rose 13.7% year over year to $667.1 million. Adjusted SG&A expenses, as a rate of sales, was 27.1%, up 10 bps from second-quarter fiscal 2023. We estimated adjusted SG&A expenses to grow 9.6% year over year in the second quarter.

Product sourcing costs were $192 million, up from $183 million in the year-ago quarter. This is due to supply-chain expense leverage from continued progress on the company's distribution center productivity initiatives.

Adjusted EBITDA increased 43.3% from the second quarter of fiscal 2023 to $201.8 million. The adjusted EBITDA margin increased 170 bps to 8.2%. Adjusted EBIT was $115.2 million, up 70.1% from $67.7 million in the year-ago quarter. The adjusted EBIT margin was 4.7%, up 160 bps from the year-ago quarter.

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An Update on Burlington Stores' Fleet of Stores

In the fiscal second quarter, Burlington Stores expanded its presence significantly by opening 36 net new stores, bringing the total to 1,057 locations by the end of the quarter. The company also relocated four older, oversized stores as part of its ongoing efforts to optimize its store base.

BURL is on track to open approximately 100 net new stores and relocate around 30 locations in fiscal 2024. Sales of the new stores are exceeding the company's expectations, which typically target about $7 million in sales for the first full year of operation. This expansion strategy is a central part of Burlington's growth plan as it continues to build out its store network across the United States.

BURL's Financial Snapshot: Cash, Debt and Equity Overview

The company ended the reported quarter with cash and cash equivalents of $659.9 million, long-term debt of $1.23 billion and stockholders' equity of $1.07 billion. BURL exited the fiscal second quarter with $1.48 billion of liquidity, including $660 million of unrestricted cash and $816 million available under its ABL facility.

Burlington Stores ended the quarter with $1.40 billion of outstanding total debt, comprising $929 million under its term-loan facility, $453 million of convertible notes and no borrowings under its ABL facility.

The company bought back 269,508 shares for $61 million under its share repurchase plan in the fiscal second quarter. As of Aug 3., 2024, BURL had $380 million remaining under its current share repurchase authorization.

BURL's Fiscal 2024 Guidance

For the fiscal third quarter, the company anticipates a 10-12% increase in total sales. This projection is based on an expected 0-2% increase in comparable store sales from the year-ago quarter. The adjusted EBIT margin is expected to improve 60-80 bps year over year in the third quarter.

The company estimates an adjusted effective tax rate of approximately 25%. Additionally, it forecasts adjusted earnings per share to be in the range of $1.45-$1.55, up from adjusted EPS of $1.10 (which excludes $7 million, net of tax, of expenses related to the acquired Bed Bath & Beyond leases) in the year-ago period.

For the fiscal fourth quarter, the outlook indicates comparable store sales to remain flat or grow up to 2%. Total sales are expected to increase between 5% and 7%. EBIT margins are anticipated to decrease in the band of 50-80 bps. EPS is projected to be in the range of $3.55-$3.75. It's important to note that the shift to a 53rd week in the fiscal year is anticipated to have a significant negative impact on total sales, adjusted EBIT and adjusted EPS for the fourth quarter.

The company's revised projections for fiscal 2024 indicate a more optimistic outlook compared with previous estimates. Total sales are now expected increase in the band of 9-10%, slightly higher than the earlier estimated 8-10%. Comparable store sales are now expected to grow in the range of 2-3%, an improvement from the previous estimate of 0-2%, indicating stronger expected performance at individual stores. In terms of profitability, the adjusted EBIT margin is projected to increase in the range of 50-70 bps, which is slightly more favorable than the previous estimated range of 40-60 bps.

The forecast for adjusted EPS has also been revised upward and is now expected to be in the range of $7.66-$7.96 compared with the earlier estimate of $7.35-$7.75. This indicates stronger overall profitability. Both projections exclude expenses associated with the acquired Bed Bath & Beyond leases.

In fiscal 2024, management intends a capital expenditure, net of landlord allowances, of $750 million. Net interest expenses are expected to be $40 million whereas the adjusted effective tax rate is likely to be 26%.

Over the past three months, this Zacks Rank #3 (Hold) company has gained 11.3% compared with the industry's 7.7% growth.

Stocks to Consider

Some better-ranked stocks are Boot Barn Holdings, Inc. BOOT, Deckers Outdoor Corporation and Steven Madden, Ltd. SHOO.

Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently sports a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for Boot Barn's fiscal 2025 earnings and sales indicates growth of 8.9% and 10.7%, respectively, from the fiscal 2023 reported figures. BOOT has a trailing four-quarter average earnings surprise of 7.1%.

Deckers Outdoor is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It has a Zacks Rank #2 (Buy) at present. DECK delivered a 25.9% earnings surprise in the last reported quarter.

The consensus estimate for Deckers' fiscal 2025 earnings and sales indicates growth of 8.4% and 11.5%, respectively, from the fiscal 2024 reported levels. DECK has a trailing four-quarter average earnings surprise of 47.2%.

Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank of 2.

The Zacks Consensus Estimate for Steven Madden's 2024 earnings and sales indicates growth of 6.9% and 12.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.5%.

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