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Burlington Stores Post Mixed Quarterly Results

Kellie Ell
·3 min read

The majority of Burlington Stores reopened last quarter as customers came flooding back for discount shopping. But the off-price retailer couldn’t refill brick-and-mortar locations fast enough to keep up with pent-up consumer demand.

The company reported mixed quarterly earnings Thursday morning as a result, with smaller-than-expected losses, but still expects “a lot of risk in Q3,” said Michael O’Sullivan, chief executive officer.

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“The second quarter had some highs and some lows,” O’Sullivan said in a statement. “The pace of our reopening sales significantly exceeded our expectations and we turned our aged spring merchandise very rapidly. This enabled us to go back into the market and take advantage of great merchandise availability.

“But we were not able to get these fresh receipts to our stores as quickly as we needed them; our in-store inventories declined and our sales trend fell off dramatically in the back half of June,” O’Sullivan said.

In fact, with May store traffic and sales levels well above expectations, the company purchased hundreds of millions of dollars worth of goods in May and June, O’Sullivan said on Thursday morning’s conference call with analysts.

“At that point in the quarter we were flying. We were exactly where we wanted to be,” O’Sullivan said. “In normal times, as an off-price retailer, these are all of the things you want. The trouble is that these are not normal times. Although we had written the orders and bought the merchandise, some of our vendors had struggled to deliver our receipts as quickly as we needed them. They themselves were coming back from a standing start.”

As a result, Burlington’s quarter-end merchandise inventories decreased 26 percent year-over-year to $608 million, compared with $824 million last year. With late June and July store inventories “below acceptable levels,” O’Sullivan said the company left “significant sales dollars on the table.”

More precisely, total revenues for the three-month period ending Aug. 1 fell 39 percent to $1.01 billion, compared with $1.65 billion the same time last year. Comparable store sales, defined by Burlington as stores that were open prior to the start of the second quarter, fell 14 percent, year-over-year. The company lost $46.7 million during the quarter as a result, compared with gains of $84.5 million a year earlier.

That said, we continue to believe the inventory constraints across the entire industry are more a function of inventory supply constraints, rather than company-specific missteps, evidenced by the broad industry-wide light inventory reports,” Simeon Siegel, managing director and senior retail analyst at BMO Capital Markets, wrote in a note. “As we have noted throughout this earnings season, we believe that when retailers stopped ordering, manufacturers stopped producing.”

Burlington reduced its selling, general and administrative expenses by $40 million to $492 million during the quarter. The New Jersey-based company ended the quarter with about $1.08 billion in cash and equivalents and 739 locations spread across 45 states and Puerto Rico.

The off-price retailer is not providing guidance, but said it expects sales trends to improve as it gets more inventory in stores. Even so, the ceo pointed out that the current quarter is still highly unpredictable with delayed — or in some cases altogether canceled — back-to-school seasons, record high unemployment rates and uncertainty around a possible resurgence of the coronavirus.

“This may be what life is going to be like for a while,” O’Sullivan said on the call. “We have to assume that the underlying drivers of this uncertainty are not going to go away in the third quarter. In fact, they could continue for the next several quarters and well into the next year.”

Shares of Burlington Stores, which were up nearly 4 percent Thursday, are up about 17.5 percent year-over-year.