Burlington Stores (BURL) Beats On Q1 Earnings, Raises View

Burlington Stores, Inc. (NYSE:BURL) commenced fiscal 2018 on an upbeat note posting positive earnings and sales surprises for the second quarter in row. The impressive performance prompted management to lift fiscal 2018 view.

The company delivered adjusted earnings of $1.26 per share that outpaced the Zacks Consensus Estimate of $1.09 and surged 59% from the prior-year period. Higher sales, margin expansion, cost control, share repurchase activity and lower tax rates led to the improvement.

Net sales of this Zacks Rank #2 (Buy) company came in at $1,518.4 million, increasing 12.8% year over year. The reported figure surpassed the consensus mark of $1,496 million. New and non-comparable stores contributed $82 million to sales. Comparable store sales (comps) rose 4.8% in the quarter.

The company sturdy performance has led the stock to surge 35% in the past six months, comfortably outperforming the industry’s gain 11%.

Gross margin increased about 35 basis points to 41.2% buoyed by improved merchandise margin, partially offset by rise in freight costs. Adjusted operating income increased 26.3% to $119.8 million, while adjusted operating margin (as a percentage of net sales) grew 90 basis points to 7.9%.

Adjusted EBITDA was up 20.5% to $164.9 million, while adjusted EBITDA margin, as a percentage of sales, expanded 70 basis points to 10.9% on account of higher gross margin and expense leverage.

Other Financial Aspects

Burlington Stores, which plans to open 35 to 40 net new stores in fiscal 2018, ended the quarter with cash and cash equivalents of $83 million, long-term debt of $1,122.6 million and shareholders’ equity of $111.3 million. For fiscal 2018, the company continues to project net capital expenditures of approximately $250 million.

During the quarter, the company bought back 488,468 shares worth $64 million. At the end of the quarter, the company still had $153 million remaining under its share buyback program.

Outlook

For fiscal 2018, management expects total sales to increase in the band of 9.7-10.5%, excluding the impact of 53rd week in 2017. Comps growth is anticipated in the range of 2.6-3.4% compared with the prior year’s growth of 3.4%. The company now envisions fiscal 2018 adjusted earnings in the range of $5.90-$6.00 per share, up from its earlier projection of $5.73-$5.83. The current Zacks Consensus Estimate for fiscal 2018 is pegged at $5.87.

Management anticipates adjusted EBITDA margin to increase 30-40 basis points, while expects adjusted operating margin to expand 20-30 basis points.

The company expects second-quarter sales to increase in the band of 8-9% with comps growth of 2-3% compared with 3.5% increase witnessed in the year-ago period. The company forecasts adjusted earnings in the range of 91-95 cents a share. The Zacks Consensus Estimate for the second quarter is 92 cents.

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