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Burlington Stores' (BURL) Q1 Earnings Top, Comp Sales Solid

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Burlington Stores, Inc. (BURL - Free Report) reported a sturdy first-quarter fiscal 2021 performance. Both the top and the bottom line surpassed the Zacks Consensus Estimate as well as improved year over year and from the first quarter of fiscal 2019 too. Robust quarterly performance was primarily buoyed by the successful execution of the core Burlington 2.0 initiative.

Insight Into the Headlines

The company delivered first-quarter adjusted earnings of $2.59 per share that surpassed the Zacks Consensus Estimate of 92 cents. Moreover, the bottom line came against the year-ago quarter’s loss of $4.80 per share and also and increased sharply from $1.26 per share reported in first-quarter fiscal 2019.

Additionally, total revenues of $2,193.3 million outshone the Zacks Consensus Estimate of $1,830 million. Further, net sales came in at $2,190.7 million while Other revenues were $2.6 million. We note that total revenues skyrocketed about 174% year over year and 35% from the level registered for the first quarter of fiscal 2019. Further, comparable-store sales (comps) grew 20% from the first-quarter fiscal 2019 reading.

Burlington Stores, Inc. Price, Consensus and EPS Surprise

Burlington Stores, Inc. Price, Consensus and EPS Surprise

Burlington Stores, Inc. price-consensus-eps-surprise-chart | Burlington Stores, Inc. Quote

Gains from the latest round of stimulus checks, the pace of the vaccine rollout, pent-up consumer demand and solid execution fueled comps. Also, the company experienced broad-based strength with respect to category and regional performance. All the company’s key merchandise categories outperformed projections while comps across the entire country came ahead of management’s expectations.

Margins

Gross margin was 43.3% in the reported quarter, up 230 basis points (bps) from the first-quarter fiscal 2019 actuals despite a 110-bps increase in freight expense. Gains from higher merchandise margin, primarily boosted by lower markdowns aided gross margin. We note that the gross margin for the quarter under review is significantly higher than the gross margin of 2% in the first quarter of fiscal 2020.

Adjusted EBITDA rose nearly 75% from the first quarter of fiscal 2019 to $293.5 million. The metric also came against an adjusted EBIT loss of $501.8 million in the first quarter of fiscal 2020.

Further, adjusted EBIT increased about 103% versus the first quarter of fiscal 2019 to $237.9 million. The metric also sees a sharp jump from adjusted EBIT loss of $501.8 million in the first quarter of fiscal 2020.

Other Financial Aspects

This presently Zacks Rank #3 (Hold) company ended the reported quarter with cash and cash equivalents of $1,530.6 million, long-term debt of $2,081 million and stockholders’ equity of $539.9 million.

Moreover, merchandise inventories were $767.6 million, up 22.6% from the last fiscal year level and down 14% from the first-quarter fiscal 2019 tally. Also, comparable in-store inventories fell 19% from the figure reported for the same quarter of fiscal 2019.

On Mar 19, 2020, management suspended the share-repurchase program. At the end of the fiscal first quarter, Burlington Stores had $348 million remaining under its authorization.

During the reported quarter, Burlington Stores opened 23 net stores. It expects to launch nine net outlets in the fiscal second quarter and 43 net stores in the second half of fiscal 2021. We note that the company operated 784 stores at the end of the quarter in 45 states and Puerto Rico.

Outlook

Management did not provide any specific sales and earnings view for fiscal 2021 (the 52 weeks ending Jan 29, 2022) due to the prevalent uncertainty stemming from the sluggish recovery pace of consumer demand and the ongoing pandemic. Going forward, management expects average comp store inventories to decline significantly throughout the fiscal year.

Following the stellar first-quarter results, the company raised its internal baseline comp sales guidance to positive 10% for the fiscal second quarter. Management also stated that if the comp trend during the fiscal second quarter surpasses 10%, then it will have the ability to chase a higher sales trend. Moreover, growth in new store and non-comp sales along with the comp baseline assumption of 7% will result in about 20% sales growth for fiscal 2021.

However, it presently assumes flattish comps for the back half of the fiscal year. This is indicative of a comp baseline assumption of about 7% for fiscal 2021. Further, the company continues to face significant headwinds due to industry-wide supply-chain issues. Such challenges are inducing huge volatility and delays in the receipt flow as well as elevating freight and supply-chain expenses. In fact, management believes that these headwinds will linger for at least the rest of the fiscal year and will somewhat squeeze margins. Also, it estimates severe expense pressure from freight and supply-chain costs.

Given the full-year comp baseline assumption, the company anticipates an operating margin contraction of 20-30 bps. In fact, the operating margin is likely to be more stressed in the fiscal second quarter than during the whole of fiscal year due to steep freight and supply-chain costs as well as the timing of certain expenses. Particularly, the metric is projected to decline 70-80 bps in the fiscal second quarter.

Moreover, capital expenditures, net of landlord allowances for fiscal 2021, are likely to be roughly $470 million. In the current fiscal year, management projects opening of 100 stores and closing or relocating 25 stores, thereby unveiling 75 net new outlets.

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