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Burlington Stores beats estimates in Q2, guides Q3 above consensus

Burlington Stores (NYSE: BURL) reported a 19% jump in earnings for the second quarter helped by higher sales, leverage on fixed expenses, disciplined expense management, and profit improvement initiatives. The results exceeded analysts’ expectations. Further, the off-price apparel retailer guided third-quarter sales and earnings above consensus estimates.

Net income jumped by 19% to $85 million or $1.26 per share. Adjusted earnings climbed by 16% to $1.36 per share. Total sales grew by 11% to $1.66 billion and comparable store sales increased by 3.8%. New and non-comparable stores contributed an incremental $115 million in sales during the quarter.

Looking ahead into the third quarter, the company expects total sales growth in the range of 8.5% to 9.5% and comparable store sales growth in the range of 2% to 3%. Adjusted earnings are anticipated to be in the range of $1.37 to $1.41 per share.

Burlington Q2 earnings review
Photo Courtesy: Burlington Stores / Facebook post

For fiscal 2019, the company lifted its total sales growth outlook to the range of 8.8% to 9.3% from the prior range of 8.5% to 9.2%, and comparable-store sales growth estimates to the range of 2% to 2.5% from the previous range of 1.3% to 2.1%. Adjusted earnings guidance is raised to the range of $7.14 to $7.22 per share from the previous range of $6.93 to $7.01 per share. For fiscal 2019, the company expects to open 50 net new stores and invest net capital expenditures of about $310 million.

As of August 3, 2019, merchandise inventories declined by 2.4% year-over-year to $824 million. The decrease was due primarily to a 7% decrease in comparable store inventory at the end of the second quarter of fiscal 2019.

During the quarter, the company invested $51 million of cash to repurchase 300,742 common shares. As of the end of the second quarter, the company had $124 million remaining on its current share repurchase authorization. In addition, Burlington said its board authorized the repurchase of up to an additional $400 million of common stock, which is authorized to be executed through August 2021.

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The company turned beneficial from its intention to focus on product freshness, lower comparable store inventories, maintain its ability to leverage pack-and-hold program, and use business intelligence system to identify sell-through rates. Burlington plans to continue utilizing e-commerce strategies offering merchandise to its customers while driving incremental traffic to its stores.

Burlington feared that the consumer spending habits could change and impact its results due to a slowdown in the US economy, an uncertain global economic outlook or a credit crisis. In addition, in order to remain competitive, the company is likely to continue offering brand-name merchandise at a discount to prices offered by other retailers as well as an assortment of merchandise that is appealing to customers.

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