Earnings preview: What to expect in Burlington Stores Q1 results?

Burlington Stores (BURL) is scheduled to report its earnings results for the first quarter of 2019 on Thursday before the market opens. The results of the off-price branded apparel retailer will be driven by comparable sales and overall sales while the bottom line will hurt by higher costs and expenses. This is despite the company’s disciplined expense management approach.

For several years, the company has been struggling for direction but its refocus on stores, employees and product assortment has remained beneficial. Also, Burlington is expected to continue facing challenges in its heritage ladies apparel business as it is likely to experience merchandise content issues.

The company’s top performing businesses are anticipated to be home, gifts, including toys, beauty, athletic shoes, men’s and ladies sportswear driven by athletic apparel and baby apparel and baby depot. At least 34 former Toys “R” Us sites are part of the company’s 2019 and 2020 new store pipeline, with additional potential opportunity beyond that.

Analysts expect the company’s earnings to decline by 0.80% to $1.25 per share while revenue will increase by 6.20% to $1.61 billion for the first quarter. In comparison, during the previous year quarter, Burlington reported a profit of $1.26 per share on revenue of $1.52 billion.

The company has surprised investors by beating analysts’ expectations for all of the past four quarters. It is expected that Burlington will post upbeat results for the first quarter of 2019. Majority of the analysts recommended a “strong buy” or “buy” rating while expecting the stock to reach $176.75 per share in the next 52 weeks.

For the fourth quarter, the company posted a 23% drop in earnings due to higher taxes despite a 3% increase in revenue. Strong store traffic more than offset the additional benefit realized in the prior-year quarter due to an extra week. Comparable store sales rose 1.3%, representing a marked slowdown from last year.

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During the fourth quarter of 2018, the company opened three new stores, which were the three former Toys “R” Us locations that it opened in November. The final store opening count for 2018 was 68 gross new stores with the seven stores that the company closed at the end of the fourth quarter, its final net new store count was 46 stores.

Burlington expects to open about 75 gross new stores in 2019 and close or relocate about 25 stores, meaning its net new store count for 2019 is expected to be 50 stores, once again, setting a new record for the company for store openings in the fiscal year.

For the first quarter, the company’s management expects adjusted earnings in the range of $1.21 to $1.25 per share, and comparable store sales to grow in the range of 0% to 0.5%. For fiscal 2019, earnings are anticipated to be in the range of $6.93 to $7.06 per share, same-store sales growth is projected to be 1.5% to 2.8%, and sales growth is predicted to be 9% to 10%.

Shares of Burlington opened lower on Tuesday and is trading in the red territory on the NYSE. The stock has risen over 12% in the past year while it has fallen over 8% in the past three months.

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