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Why Burlington Stores Is the Weaker “Outlier” Among Off-Price Winners TJX and Ross

Burlington Stores’ sales declined in Q3, despite what should have been a stronger season for the off-price retailer.

Total sales were down 11% on top of a 30% increase in Q3 of last year. Net income was $17 million, and diluted earnings per share was $0.26. Comparable store sales for Q3 decreased 17%.

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The weaker than expected results came during what has been a generally strong quarter for other off-price companies. TJX Companies, which owns T.J. Maxx and Marshalls, topped profit estimates in the third quarter. Ross Stores Inc. last week raised its guidance given its third quarter sales momentum and improved holiday assortments. Experts previously told FN that the off-price sector was poised to have a strong holiday season, thanks to unusually high inventories across retail and a surge of deal-hungry consumers.

This juxtaposition was not lost on Burlington CEO Michael O’Sullivan, who described Burlington’s results this year as “disappointing” and the company as an “outlier within off-price.”

“As an off-price retailer, we should be able to drive stronger performance than this,” he said in a Tuesday call with investors.

O’Sullivan said a pullback on higher pricing and more aggressive markdowns to clear through slow-moving products in Q3 contributed to the weaker sales and profits. To lift sales, Burlington increased its assortment of recognizable key brands and sold some reserve inventory for Q4 during Q3 instead. According to O’Sullivan, these measures should have been implemented earlier.

We should have responded more aggressively and more rapidly,” he said.

O’Sullivan also noted Burlington’s high exposure to lower-income consumers, who have born the brunt of inflation’s impact. He also noted Burlington’s transition to carry more off-price goods, which has involved key investments in its buying capabilities over the last few years.

Moving forward, the company reaffirmed its conservative 2022 outlook but expressed optimism for trends to pick up in 2023, as the economy slows and consumers ramp up their focus on value. A slowdown in promotional trends across full-price retail could also bolster off price players like Burlington, who rely on selling goods for less than regular retailers.

To drive growth, a focus on picking up sales is crucial, O’Sullivan said.

“We have to drive sales,” he said. “The only way to do that in our business is to continue to improve our ability to deliver value to the customer. I realize 2022 has not been a good advertisement for our ability to do that, but we’ll learn from the mistakes that we’ve made this year.”