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Burlington Stores' (BURL) Q1 Earnings Miss, Revenues Fall Y/Y

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·6 min read
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Burlington Stores, Inc. BURL reported lower-than-expected results for first-quarter fiscal 2022. Both the top and the bottom line compared unfavorably with the respective prior fiscal year’s quarterly tallies. Margins were also soft in the reported quarter.

Quarterly performance was mainly hurt by lower inventory levels and weak sales, including comp trends in May similar to April. Also, inflationary pressures with higher supply-chain costs and elevated freight expenses weighed on BURL’s results in the quarter.

Over the past six months, the stock has decreased 25.8%, wider than the industry's 19.2% decline.

Insight Into the Headlines

Burlington Stores delivered adjusted earnings of 54 cents per share, lagging the Zacks Consensus Estimate of 64 cents. Also, the bottom line fell from $2.59 a share recorded in the year-ago period.

Total revenues of $1,929.7 million tumbled 12% from the last fiscal year’s reported figure. Net sales decreased 12.1% from the first-quarter fiscal 2021 number to $1,925.6 million while Other revenues increased 53.8% to $4 million. The Zacks Consensus Estimate stood higher at $2,013 million for the reported quarter.

Comps dropped 18% from the fourth-quarter fiscal 2019 reading. Lower in-store inventory levels caused the decline.

Margins

Gross margin was 41% in the reported quarter, down 230 basis points (bps) from the first-quarter fiscal 2021 actuals. Merchandise margins declined 80 bps and freight expenses rose 150 bps.

Adjusted SG&A as a rate of sales was 26.7%, increasing 300 bps from the first-quarter fiscal 2022 actuals. Product sourcing costs included in SG&A came in at $157 million, up from $141 million seen in the first quarter of fiscal 2022. Product sourcing costs represent the processing goods expenses via supply chain and buying costs. Higher supply-chain costs mainly caused the deleverage.

Adjusted EBITDA decreased 57.3% from the first-quarter fiscal 2021 tally to $125 million. As a rate of sales, the metric decreased 690 bps. Adjusted EBIT was $59.1 million, down 75.2% from the first-quarter fiscal 2021 reading. Adjusted EBIT margin fell 780 bps from the first-quarter fiscal 2021 finals.

Other Financial Aspects

This presently Zacks Rank #4 (Sell) Burlington Stores ended the reported quarter with cash and cash equivalents of $627.1 million, long-term debt of $1,474.9 million and a stockholders’ equity of $716.2 million. BURL exited the fiscal first quarter with $1,225 million of liquidity, including $627 million of unrestricted cash and $598 million available under its ABL facility.

Burlington Stores ended the quarter with $1,489 million of outstanding total debt, comprising $949 million under its Term Loan Facility, $508 million of Convertible Notes and no borrowings under its ABL Facility.

Merchandise inventories were $1257.1 million, up 64% from the first-quarter fiscal 2021 tally. Comparable store inventories inched up 2% from the level recorded in the same quarter of fiscal 2021. Reserve inventory accounted for 50% of the total inventory at the end of the reported quarter.

Burlington Stores bought back 512,905 shares for $99 million under its share repurchase plan in the fiscal first quarter. As of Apr 30, 2022, BURL had $551 million remaining under the share repurchase authorizations.

During the reported quarter, BURL inaugurated 26 net new stores, taking the total store base to 866. This comprised 33 store openings and seven relocations or closures. For fiscal 2022, management intends to open 120 stores, adding 90 net new stores. It aims to relocate or close 30 stores in the aforementioned period.

For fiscal 2022, management projects capital expenditures, net of landlord allowances, of about $730 million.

Outlook

Management issued guidance for the second quarter and fiscal 2022. Comps are likely to fall in the band of 6-9% in fiscal 2022 versus a 15% rise in fiscal 2021. For fiscal 2022, adjusted EBIT margin is expected to decrease 130-200 bps from the fiscal tally while adjusted earnings per share are envisioned in the bracket of $6.00-$7.00 compared to the adjusted earnings per share of $8.41 recorded last fiscal year.

For the back half of the full fiscal, management forecasts comp store sales to come in the band of a negative 2% to 3%, with an expectation that comp sales in the fiscal fourth quarter will be stronger than the fiscal third-quarter level.

For the fiscal second quarter, comps are expected to decrease 13-15%. Adjusted EBIT margin is likely to contract 610-670 bps form the last fiscal year’s quarterly reading while adjusted earnings per share are forecast in the range of 18-31 cents, indicating a decline from $1.50 on a GAAP basis and $1.94 on a non-GAAP basis recorded last fiscal year. Margin decline is mainly driven by elevated freight costs, supply-chain expenses and a deleveraged SG&A due to the comp store sales decrease.

3 Hot Stocks to Consider

We highlighted three better-ranked stocks in the Retail - Wholesale sector, namely Tecnoglass TGLS, Boot Barn Holdings BOOT and Fastenal FAST.

Tecnoglass engages in manufacturing and selling architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 21.3% and 28.7%, respectively, from the corresponding year-ago period's reported figures. TGLS has a trailing four-quarter earnings surprise of 28.3%, on average.

Boot Barn, a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories, currently flaunts a Zacks Rank of 1. BOOT has a trailing four-quarter earnings surprise of 25.2%, on average.

The Zacks Consensus Estimate for Boot Barn’s current financial-year sales and earnings per share suggests growth of 17% and 4.4%, respectively, from the corresponding year-ago period’s reported figures. BOOT has an expected EPS growth rate of 20% for three-five years.

Fastenal, a national wholesale distributor of industrial and construction supplies, currently has a Zacks Rank #2 (Buy). FAST has a trailing four-quarter earnings surprise of 5%, on average.

The Zacks Consensus Estimate for Fastenal's current financial-year sales and earnings per share suggests growth of 15.4% and 16.3%, respectively, from the corresponding year-ago period’s actuals. FAST has an expected EPS growth rate of 9% for three-five years.


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