• Total Sales Growth: Increased 11% in Q3 2024, following a 12% growth in Q3 2023.
• Comparable Store Sales: Increased 1% in Q3 2024, on top of a 6% increase in Q3 2023.
• Gross Margin Rate: 43.9%, an increase of 70 basis points from the previous year.
• Adjusted EBIT Margin: Expanded by 80 basis points to 5.6% in Q3 2024.
• Adjusted Earnings Per Share: $1.55, representing a 41% increase from the prior year.
• Inventory Levels: Comparable store inventories down 2% versus the end of Q3 2023.
• New Store Openings: 147 new stores opened in 2024, with a net increase of 101 stores after closures.
• Q4 2024 Guidance: Comp store sales expected to be flat to up 2%; total sales to increase 5% to 7%.
• Full Year 2024 Guidance: Comp store sales growth of approximately 2%; total sales increase of 9% to 10%.
• Share Repurchase: $56 million in common stock repurchased during Q3 2024.

• Warning! GuruFocus has detected 5 Warning Sign with BURL.

Release Date: November 26, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Total sales increased by 11% in the third quarter, driven by the new store opening program.
• Comp store sales for the third quarter increased by 1%, despite warmer weather impacting sales.
• Margin performance improved with an 80 basis point increase, driven by higher merchant margin and supply chain savings.
• The new store pipeline is strong, with 147 new stores opened this year, exceeding expectations.
• The company is optimistic about the holiday season and Q4, with November sales running ahead of plan.

Negative Points

• Warmer temperatures negatively impacted Q3 comp sales by 300 basis points, particularly affecting cold weather merchandise.
• Major hurricanes in Q3 further impacted comp sales by an additional point.
• The fourth quarter EBIT margin is expected to decrease by 50 to 80 basis points due to transitory headwinds.
• There is uncertainty regarding the impact of potential tariffs and economic policies on future performance.
• The 53rd-week calendar shift negatively impacts Q4 total sales, margin, and earnings.

Q & A Highlights

Q: How did warmer weather impact Burlington's third-quarter performance, and what are the expectations for the fourth quarter? A: Michael O'Sullivan, CEO, explained that warmer weather negatively impacted third-quarter comps by 300 basis points, with an additional point due to hurricanes. Despite this, the underlying comp growth would have been 5% without these factors. For the fourth quarter, the company is optimistic, as November sales are ahead of plan, and holiday selling becomes more important than cold weather categories.

Q: Can you elaborate on Burlington's inventory levels and any potential markdown risks? A: Kristin Wolfe, CFO, stated that Burlington managed inventory well in Q3, ending with comp store inventories down 2%. The company reacted quickly to warmer temperatures by pulling back on receipts, resulting in clean and current inventories with no major markdown liabilities heading into Q4.

Q: What is the current state of the low-income consumer, and how is it affecting Burlington's business? A: Michael O'Sullivan noted that Burlington indexes higher among lower-income consumers, who are now outperforming the chain. This demographic is seeking value, and their real incomes are finally edging up, supporting Burlington's underlying trends. The company also sees healthy performance in other income bands, indicating potential trading down from moderate to higher-income shoppers.

Q: What are the main drivers of Burlington's margin expansion in Q3, and what is the outlook for Q4? A: Kristin Wolfe highlighted that Q3 saw an 80 basis point operating margin expansion due to higher merchandise margins, lower markdowns, and supply chain efficiencies. For Q4, the company expects a 50 to 80 basis point decline in EBIT margin due to transitory headwinds like ocean freight costs and higher year-over-year shortage rates.

Q: How is Burlington preparing for potential policy changes under the new administration? A: Michael O'Sullivan mentioned that while it's difficult to predict specific impacts, policies enhancing real incomes or reducing corporate taxes could benefit Burlington. However, risks like inflation or economic slowdown are also considered. The company believes that uncertainty and disruption often benefit off-price retail, and Burlington plans to maintain flexibility and react accordingly.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.