Burlington Stores (BURL) Q2 FY25 Earnings call transcript Aug 29, 2024

Burlington Stores, Inc. reported robust sales growth and margin expansion in the second quarter of fiscal 2024, driven by new store additions and strong comp sales growth. The company's strategic focus on value-conscious customers, particularly the lower-income shopper, has paid off, contributing to a 13% increase in total sales and a 5% increase in comp sales for the quarter.

Sales Growth and Operating Margin Expansion

In the second quarter, Burlington Stores added 36 net new stores and ended the quarter with 1,057 locations. This expansion, coupled with the 5% increase in comp sales growth, demonstrates the company's ability to effectively penetrate new markets and capitalize on existing customer demand. The company's focus on value has been particularly effective in the current economic climate, where consumers are increasingly focused on affordability.

Burlington Stores also achieved significant operating margin expansion in Q2, expanding by 160 basis points compared to the second quarter of 2023. The company's gross margin increased by 110 basis points, driven by faster inventory turns and lower markdowns. Additionally, supply chain efficiency initiatives resulted in a 60 basis point reduction in expenses, underscoring the company's commitment to operational excellence.

Strategic Outlook and Guidance for the Rest of the Year

CEO Michael O'Sullivan expressed optimism for the rest of the year, maintaining guidance of 0% to 2% comp growth for the third and fourth quarters. Despite the cautious outlook, O'Sullivan highlighted the potential for upside in the back half of the year if the underlying trend is stronger. The company's revised full-year earnings guidance for fiscal 2024 reflects this cautious optimism, with increased expectations for comp sales, total sales, adjusted EBIT margin, and adjusted earnings per share.

Investment in Store Payroll and Future Plans

Burlington Stores' investment in store payroll to improve service levels and store conditions has yielded positive results, with customer service scores showing improvement. The company's focus on maintaining a competitive wage structure and strategic expansion plans, including the opening of new stores and a larger distribution center, underscore its commitment to driving growth and shareholder value.

Challenges and Opportunities

However, the company faces challenges, including the impact of inflation and the potential for increased competition. The 53rd week shift in the calendar, which results in a lower-volume week in Q4, also poses challenges for total sales growth. Nevertheless, Burlington Stores' strategic focus on value, operational efficiency, and market expansion position it well for continued growth in the coming quarters.

Conclusion

Burlington Stores' strong sales growth and margin expansion in Q2, coupled with its strategic focus on value and operational efficiency, position it well for continued growth in the second half of the year. The company's ability to effectively cater to the value-conscious consumer, particularly the lower-income shopper, has been a key driver of its success. As Burlington Stores continues to expand its store network and invest in store payroll and technology, it is well-positioned to capitalize on the evolving retail landscape and maintain its competitive edge.