Burlington Stores, Inc. BURL delivered soft results in first-quarter fiscal 2020, wherein it reported wider-than-expected loss per share with a sales miss. Both the top and the bottom line also declined year over year. Results were mainly hurt by COVID-19 that compelled the company to shut all stores effective Mar 22, till the end of the first quarter.
Nevertheless, management has begun the process of reopening stores on May 11, 2020, and as of now, 332 outlets have been re-opened. Moving ahead, it anticipates opening 402 stores as of May 29, 2020, while majority of the remaining outlets will be opened by mid-June. It has been seeing higher traffic levels and sales in such stores, as customers are responding favorably to the company’s clearance strategy.
The company delivered first-quarter adjusted loss (exclusive of management transition costs) of $4.76 per share, wider than the Zacks Consensus Estimate of a loss of $1.59. Also, the bottom line compared unfavorably with earnings of $1.26 recorded in the prior-year quarter. Significant sales decline and $272-million inventory charge against aged inventory due to extended store closures with respect to COVID-19 hurt the bottom line.
Burlington Stores, Inc. Price, Consensus and EPS Surprise
Burlington Stores, Inc. price-consensus-eps-surprise-chart | Burlington Stores, Inc. Quote
Total revenues came in at $801.5 million, down 50.9% year over year. Moreover, net sales plunged 51% year over year to $798 million, mainly owing to COVID-19. The Zacks Consensus Estimate is pegged at $925 million. Other revenues came in at $3.5 million, down 37.5% year over year.
Gross margin contracted significantly from 41% to 2% in the fiscal first quarter due to the aforesaid inventory charge for aged inventory. Further, this charge is anticipated to cover entire cost of markdowns to clear inventory in the fiscal second quarter.
Adjusted SG&A expenses, which excludes management transition costs of $3 million made in the quarter under review, was $390 million, down 8.9% year over year. However, SG&A includes product sourcing costs of $76 million.
Furthermore, adjusted operating loss (exclusive of management transition costs) was $499.2 million during the reported quarter, compared with operating income of $117.4 million recorded in the year-ago quarter.
Over the past three months, shares of this off-price retailer have lost 3.8%, wider than the industry’s 0.8% fall.
Other Financial Aspects
Burlington Stores ended the reported quarter with cash and cash equivalents of $1,488.5 million, long-term debt of $2,304.1 million and shareholders’ equity of $279.1 million. Also, it had $151 million cash on its ABL facility.
Further, merchandise inventories were $625.9 million, down 30% from last year. The decline was mainly due to strict actions to reduce inventory receipts during the extended store-closure period and the aforesaid inventory charge. Meanwhile, pack and hold inventory constituted 22% of the total inventory by fiscal first-quarter end.
On Apr 16, 2020, the Zacks Rank #3 (Hold) company concluded $1.1-billion debt offerings. These included high-yield senior secured notes of $300 million and convertible senior unsecured notes of $805 million, both maturing in April 2025.
During the quarter, the company bought back 243,573 shares for $50 million before the suspension of the share repurchase program announced on Mar 19. At the end of the reported quarter, the company had $348 million remaining under its share buyback program. It had fully diluted outstanding shares of 65.6 million at the end of fiscal first quarter. Notably, it bought back roughly 1.1 million shares from the end of the first quarter of fiscal 2019 till the suspension of its share repurchase program.
Management did not issue sales and earnings view for fiscal 2020 due to volatility regarding the recovery of consumer demand. However, it now expects depreciation & amortization, exclusive of favorable lease costs, of nearly $230 million compared to the prior anticipation of $235 million. Interest expense, net of non-cash interest of $24 million on convertible notes, is now projected to be $80 million versus $45 million expected earlier.
For fiscal 2020, the company expects to introduce 64 new stores and relocate or shutter 26, with total 38 net new outlets. Nearly 16 new outlets have been shifted from fall 2020 to spring 2021. Previously, management estimated opening 80 stores with 54 net new outlets.
Furthermore, capital expenditures, net of landlord allowances, are envisioned to come at nearly $260 million versus a prior outlook of $400 million.
Better-Ranked Retail Stocks
Sprouts Farmers Market SFM has a trailing four-quarter positive earnings surprise of 37.2%, on average. The stock currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SpartanNash SPTN, also a Zacks Rank #1 stock, delivered a positive earnings surprise of 15% in the last reported quarter.
Office Depot ODP has a long-term earnings growth rate of 6.8%. Currently, it carries a Zacks Rank #2 (Buy).
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.1% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Office Depot, Inc. (ODP) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
Burlington Stores, Inc. (BURL) : Free Stock Analysis Report
SpartanNash Company (SPTN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research