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Burlington Stores (BURL) Up on Q4 Earnings Beat & Solid View

Zacks

Burlington Stores, Inc. BURL continued with its positive earnings surprise streak in the fourth quarter of fiscal 2017. Also, net sales surpassed the Zacks Consensus Estimate, after missing the same in the preceding quarter. Following the results, the company’s shares were up 5.8% yesterday.

The company’s adjusted earnings of $2.17 a share outpaced the Zacks Consensus Estimate of $2.09. The bottom line was also up from the year-ago figure of $1.78. Higher sales, margin expansion, cost control and share repurchase activity led to the improvement.

Net sales of this Zacks Rank #2 (Buy) company came in at $1,936.8 million, increasing 14.9% year over year. The reported figure surpassed the consensus mark of $1,882 million. Comparable store sales (comps) rose 5.9% in the quarter compared with 4.6% growth in the year-ago quarter.

In fact, this was the 20th straight quarter of comps growth and the reflection of the same is quite visible in Burlington Stores’ price performance. In the past six months, the stock has surged 40.1% comfortably outperforming the industry’s gain 17.3%.


Gross margin increased 20 basis points to 42% mainly owing to higher merchandise margin. While adjusted operating income increased 17% to $250 million, operating margin grew 20 basis points to 12.9%.

Adjusted EBITDA was up 17% to $298 million, while EBITDA margin, as a percentage of sales, expanded 30 basis points to 15.4% on account of higher gross margin. Management anticipates adjusted EBITDA margin expansion of 30-40 basis points in fiscal 2018.

Currently, this off-price retailer intends to focus more on categories such as home, beauty and ladies apparel. Furthermore, Burlington Stores remodeled 34 stores and opened 37 net new stores in fiscal 2017. It plans to open 35 to 40 net new stores in fiscal 2018.

Per the company, there is room to increase the store count to 1,000. Notably, it operated 629 stores at the end of the fiscal fourth quarter. Management informed that new and non-comp outlets contributed $79 million to the fourth-quarter sales.

Other Financial Aspects

Burlington Stores ended the quarter with cash and cash equivalents of $133.3 million, long-term debt of $1,113.8 million and shareholders’ deficit of $86.8 million. For fiscal 2018, the company projects net capital expenditures of approximately $250 million.

In the quarter under review, the company bought back 457,528 shares worth $52 million. At the end of the quarter, Burlington Stores had $217 million remaining under its current share buyback program.

Burlington Stores, Inc. Price, Consensus and EPS Surprise

Outlook

For fiscal 2018, management expects total sales to increase in the band of 9-10%, excluding the 53rd week. Comps growth is anticipated in the 2-3% range compared with the prior year’s gain of 3.4%. The company envisions fiscal 2018 adjusted earnings in the range of $5.73-$5.83 per share compared with $4.14 (excludes the impact of 53rd week) in the previous year.

For the first quarter of fiscal 2018, earnings are envisioned to come within the range of $1.05-$1.09 per share compared with 79 cents in the prior-year period. Further, sales and comparable sales are expected to lie within 9.5% to 10.5% and 2% to 3%, respectively.

The Zacks Consensus Estimate for the first quarter and fiscal 2018 is pegged at 99 cents and $5.20, respectively.

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