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01/11 11:31
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals a positive outlook with strong financial metrics, optimistic guidance, and strategic growth initiatives. Despite some risks like tariff pressures and weather sensitivity, the company demonstrates resilience through strategic inventory management and successful pricing strategies. The Q&A section highlights management's confidence in market positioning and new store performance. Overall, the positive guidance, strong new store pipeline, and effective cost management suggest a likely stock price increase in the short term.
Total Sales Growth Total sales increased 7% in the third quarter, on top of 11% sales growth last year. Year-to-date, total sales have increased 8% on top of 11% year-to-date growth last year. The growth was driven by strong back-to-school trends but was negatively impacted by warmer-than-usual weather in September.
Comp Store Sales Comp store sales for the third quarter increased 1%. The growth was initially strong due to back-to-school trends but dropped significantly in September due to warmer weather. However, the trend picked up to mid-single digits in mid-October as the weather turned cooler.
Gross Margin Rate The gross margin rate for the third quarter was 44.2%, an increase of 30 basis points versus last year. This was driven by a 10 basis point increase in merchandise margin and a 20 basis point decrease in freight expenses.
Product Sourcing Costs Q3 product sourcing costs were $214 million versus $209 million last year, decreasing 40 basis points compared to last year. This was primarily driven by leverage in supply chain through cost savings and efficiency initiatives.
Adjusted SG&A Costs Adjusted SG&A costs in Q3 levered 20 basis points versus last year, primarily achieved in store-related costs through efficiency and productivity initiatives.
Adjusted EBIT Margin Q3 adjusted EBIT margin was 6.2%, 60 basis points higher than last year. This was well above the guidance range of down 20 basis points to flat.
Adjusted Earnings Per Share (EPS) Q3 adjusted EPS was $1.80, representing a 16% increase versus the prior year. This was well above the guidance range.
Comparable Store Inventories Comparable store inventories were down 2% versus the end of Q3 2024. The company adjusted receipts quickly using merchandising tools to balance inventories despite the weather-driven slowdown.
Reserve Inventory Reserve inventory was 35% of total inventory versus 32% last year, with a 26% increase in dollar terms compared to last year. The reserve includes high-quality merchandise used to chase sales trends.
Liquidity Liquidity at the end of Q3 was approximately $1.5 billion, consisting of $584 million in cash and $948 million in availability on the ABL. There were no outstanding borrowings on the ABL at the end of the quarter.
Stock Repurchase During Q3, the company repurchased $61 million in stock, with $444 million remaining on the repurchase authorization.
Net New Stores In Q3, 73 net new stores were opened, bringing the total store count to 1,211. The company now expects to open 104 net new stores in fiscal 2025, up from the original estimate of 100.
New Store Openings: Burlington plans to open 110 net new stores in 2026, up from the previously discussed number. This reflects the strength of their new store pipeline and the performance of new stores. In 2025, they opened 104 net new stores, exceeding their original estimate of 100.
Margin Expansion: Despite weather-driven sales challenges, Burlington achieved significant margin expansion in Q3 2025, with adjusted EBIT margin increasing by 60 basis points year-over-year. Full-year 2025 EBIT margin guidance was raised to reflect a 60-70 basis point increase, despite tariff pressures.
Inventory Management: Burlington effectively managed inventory during Q3 2025, adjusting receipts quickly in response to weather-driven sales slowdowns. Comparable store inventories were down 2% year-over-year, and reserve inventory increased to 35% of total inventory, up from 32% last year.
Cost Efficiencies: The company achieved cost savings through supply chain efficiencies and productivity initiatives, leading to a 40 basis point decrease in product sourcing costs and a 20 basis point decrease in adjusted SG&A costs in Q3 2025.
Long-Range Financial Goals: Burlington is on track to achieve its 2028 goal of $1.6 billion in operating income. The company has already achieved 170 basis points of the 400 basis points of margin improvement targeted, despite tariff headwinds. They are also optimistic about sustaining or exceeding their current pace of new store openings.
Weather Sensitivity: The company's sales trends are highly sensitive to weather conditions, particularly due to its strong brand equity in outerwear. Warmer-than-usual weather in September caused a significant drop-off in store traffic and sales.
Tariff Pressures: The company faced considerable headwinds from tariffs, which have negatively impacted margins despite overall margin expansion.
Economic Uncertainty: The company acknowledges significant economic uncertainty, which could affect its business in 2026. This has led to conservative planning for comp sales growth.
Competitive Pressures: The company operates in a competitive retail environment, which requires careful planning and execution to maintain growth and profitability.
Supply Chain Costs: Although the company has achieved cost savings and efficiency in its supply chain, sourcing costs remain a challenge, requiring ongoing management.
Fourth Quarter 2025 Guidance: Maintaining comparable store sales guidance of 0% to 2%. Total sales expected to increase 7% to 9%. Adjusted EBIT margin expected to increase by 30 to 50 basis points. Adjusted earnings per share projected to range from $4.50 to $4.70, representing a 9% to 14% increase versus the prior year.
Full Year 2025 Guidance: Comp store sales growth expected to be 1% to 2%. Total sales projected to increase approximately 8%. EBIT margins expected to expand by 60 to 70 basis points, 40 basis points higher than original guidance despite tariff pressures. Adjusted earnings per share forecasted to range from $9.69 to $9.89, reflecting a 16% to 18% increase year-over-year.
Preliminary 2026 Outlook: Total sales growth projected in the high single digits. Plan to open at least 110 net new stores, higher than previously discussed. Comp store sales expected to grow flat to 2%. Operating margin assumed to be flat at 2% comp growth, with leverage of 10 to 15 basis points for each additional point of comp growth.
Longer-Range Financial Goals (2028): Targeting approximately $1.6 billion in operating income by 2028. Expecting average annual comp sales growth of 4% to 5% over the remaining years of the plan. Planning to sustain or exceed 100 net new store openings annually, with potential for higher growth based on the new store pipeline. Margin expansion progress on track, with 170 basis points achieved out of the 400 basis points opportunity identified two years ago.
Stock Repurchase: During the third quarter, we repurchased $61 million in stock. At the end of the quarter, we had $444 million remaining on our repurchase authorization.
The earnings call indicates solid financial performance with optimistic guidance for 2025 and beyond. The company plans significant store expansion, maintaining strong margins despite tariff pressures. New store productivity and the robust off-price merchandise environment are positive signs. Concerns about market share loss and economic uncertainties exist, but management's strategic focus and resilience among lower-income customers are reassuring. Overall, the sentiment is positive, suggesting a potential stock price increase of 2% to 8%.
The earnings call reveals a positive outlook with strong financial metrics, optimistic guidance, and strategic growth initiatives. Despite some risks like tariff pressures and weather sensitivity, the company demonstrates resilience through strategic inventory management and successful pricing strategies. The Q&A section highlights management's confidence in market positioning and new store performance. Overall, the positive guidance, strong new store pipeline, and effective cost management suggest a likely stock price increase in the short term.
The earnings call summary indicates a positive outlook with strategic initiatives such as Burlington 2.0 and store expansion. The Q&A section provides insights into effective tariff offsets and strong demographic performance. Despite some cautious guidance for the second half, the company's strategic actions and favorable trends, such as strong back-to-school sales and improved store conditions, suggest a positive sentiment. The overall financial health and strategic initiatives outweigh the cautious guidance, leading to a positive stock price prediction.
The earnings call reflects a mixed outlook. While there are positive elements such as a share repurchase program, improved margins, and strong EPS growth, there are concerns about decelerating comp sales growth, potential macroeconomic impacts, and supply chain challenges. The guidance for 2025 shows moderate growth expectations, but the uncertainty regarding tariffs and economic conditions could offset these positives. Given the balanced nature of these factors, a neutral stock price reaction is anticipated over the next two weeks.
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