Apparel retailer Burlington Stores (BURL -1.03%) reported third-quarter earnings on Tuesday, Nov. 26, that fell roughly in line with analyst consensus estimates. The company showed notable financial growth during this period. Adjusted EPS stood at $1.55, up 41% from the previous year. Total revenue reached $2.53 billion, a robust 11% increase year over year but a slight decrease from the consensus estimate. The growth came despite warmer weather that hurt coat sales.
Overall, the third quarter met expectations, underscoring its capability to navigate competitive retail environments.
| Metric | Q3 2024 | Analysts' Estimate | Q3 2023 | Change (YOY) |
|---|---|---|---|---|
| Adjusted EPS | $1.55 | $1.55 | $1.10 | 41% |
| Revenue | $2.53 billion | $2.55 billion | $2.29 billion | 11% |
| Gross margin rate | 43.9% | N/A | 43.2% | 70 bps |
| Net income | $90.6 million | N/A | $48.6 million | 86% |
Source: Burlington Stores: Note: Analyst consensus estimates for the quarter provided by FactSet. YOY = Year over year.
Business Overview
Burlington Stores operates as a prominent off-price retailer, offering a wide range of apparel and home goods at discounted prices. The heart of its business lies in its ability to source higher-quality, branded merchandise at reduced costs, appealing to price-conscious shoppers. Currently, Burlington runs over 1,000 stores across the U.S., with a long-term goal to expand its footprint to 2,000 locations. This expansion is critical for driving sustained revenue growth and increasing market presence.
Burlington prioritizes a flexible purchasing strategy, allowing it to swiftly adapt to market changes and customer preferences. As a company, it focuses on a treasure hunt shopping experience, leveraging its merchandising and pricing strategies to attract and retain customers. The retailer competes within the fragmented retail apparel and home furnishings market, where maintaining competitive pricing and quality is vital for success.
Quarterly Performance Insights
During the third quarter, Burlington Stores highlighted its strategic focus on inventory management and store expansion. The company's revenue growth was supported by a 1% rise in same-store sales and a proactive decision to avoid over-stocking cold weather merchandise due to unseasonably warm weather. Excluding the cold weather categories, Burlington noted a 4% increase in comparable sales, underlining its adaptability and underlying performance strength.
From a financial perspective, Burlington's gross margin improved to 43.9%, up from 43.2% the prior year, due to its strategic control over inventory and lower markdowns. Selling, General, and Administrative (SG&A) expenses decreased by 80 basis points as a percentage of net sales, reflecting an improvement in expense management. Furthermore, the adjusted earnings before interest and taxes (EBIT) margin increased by 80 basis points, underpinned by higher gross margins and improved supply chain expense leverage. Additionally, net income soared to $91 million, marking an 86% increase compared to the same period last year.
Freight costs remain a particular concern, as they pose operational challenges and competitive pressures in the retail space. This quarter, Burlington made strides in its store expansion strategy by opening new locations, remaining on course to add a net of 101 new stores through fiscal 2024. This expansion supports its broader objective of achieving 2,000 stores and strengthens its presence across the U.S.
Looking Ahead
Looking forward, Burlington management said it expects to generate fourth-quarter adjusted earnings of $3.55 to $3.75 a share, below the analyst estimate of $3.78 a share. While it closed a robust third quarter, Burlington remains cautious about fourth-quarter prospects, anticipating comparable store sales growth between 0% and 2%.
Management did increase its adjusted EPS guidance for full-year fiscal 2024 to a range of $7.76 to $7.96. The company is gearing up for the holiday season, planning its inventory position carefully to capitalize on the shopping peak. It expects total sales to increase in the range of 9% to 10% and comparable sales to increase approximately 2%.
Burlington's future strategy includes continuing its store expansion efforts and enhancing its distribution and warehousing efficiency to ensure a smoother supply chain. Given the existing competitive environment, Burlington will need to navigate economic pressures and adjust its strategies accordingly if it wishes to maintain growth and profitability in the coming quarters.
