It has been about a month since the last earnings report for Burlington Stores (BURL - Free Report) . Shares have added about 6.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Burlington Stores due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Burlington Stores Beats on Q4 Earnings
Burlington Stores, Inc. delivered fourth-quarter fiscal 2018 results, wherein both top and bottom lines improved year over year and the latter topped the Zacks Consensus Estimate for the ninth straight time.
However, the stock came under pressure following the company’s sales miss and softer-than-anticipated comps growth that decelerated on a sequential and year-over-year basis. These factors along with management’s not so impressive view seem to have hurt investors’ sentiments. The company expects to continue facing cost-related hurdles in fiscal 2019, stemming from higher wages and freight costs, among other factors.
The company delivered adjusted earnings of $2.83 per share that outpaced the Zacks Consensus Estimate of $2.77 and surged 28% year over year. Higher sales and disciplined cost control seem to have led to the upside.
Net sales advanced 2.8% year over year to $1,991.5 million, though it came below the consensus mark of $2,033 million. Excluding the additional week from last year’s results, net sales increased 7.4%. New and non-comparable stores contributed $173 million to sales. Other revenues came in at $6.6 million, down 11.5% year over year. We note that comps (on a shifted basis) rose 1.3% in the reported quarter compared with increase of 5.9% in the year-ago period and 4.4% in the preceding quarter. This was the 24th straight quarter of comps growth.
Gross margin (excluding last year’s 53rd week) remained flat year over year as improved merchandise margin was countered by escalated freight costs. Adjusted EBIT grew 4.5% to $261.2 million, while the same rose 7% on exclusion of the additional week last year. Adjusted EBIT margin (excluding the 53rd week) contracted about 10 basis points (bps), owing to deleverage on depreciation and amortization expenses.
During the reported quarter, Burlington Stores opened three outlets and shuttered seven. In fiscal 2018, the company inaugurated 68 stores, while it relocated or closed 22 stores. Stores opened in the fourth quarter were former Toys “R” Us locations. The company concluded the quarter with 675 stores.
In fiscal 2019, the company plans to introduce 75 gross stores, and relocate or shutter about 25, thereby projecting 50 net new stores for the fiscal.
Other Financial Aspects
Burlington Stores ended the reported quarter with cash and cash equivalents of $112.3 million, long-term debt of $983.6 million and shareholders’ equity of $322.7 million. Net capital expenditures for fiscal 2018 were $254 million. For fiscal 2019, the company projects net capital expenditures of roughly $310 million.
During the quarter, the company bought back 353,845 shares for $59 million. At the end of the reported quarter, the company still had $298 million remaining under its share buyback program.
For fiscal 2019, management expects total sales to increase 9-10%. Comps growth is anticipated to be 1.5-2.8% compared with 3.2% rise witnessed in fiscal 2018. Management envisions fiscal 2019 adjusted earnings of $6.93-$7.06 per share, which represents an increase of 10-12% from the year-ago period.
Management anticipates adjusted EBIT margin to be flat to 10-bp increase. Further, Burlington Stores projects interest expenses of approximately $53 million for the fiscal year, while effective tax rate is anticipated to be nearly 21%.
The company expects first-quarter fiscal 2019 sales to increase 7-9%, with comps growth anticipated to be flat to up 2% compared with 4.8% rise witnessed in the year-ago period. The company forecasts adjusted earnings of $1.21-$1.31 per share compared with $1.26 reported in the year-ago quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
At this time, Burlington Stores has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Burlington Stores has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.