Burlington Stores (NYSE: BURL) reported Q4 EPS of $3.08, $0.15 worse than the analyst estimate of $3.23. Revenue for the quarter came in at $2.2 billion versus the consensus estimate of $2.2 billion.

Fiscal 2019 Fourth Quarter Operating Results (for the 13 week period ended February 1, 2020 compared with the 13 week period ended February 2, 2019)

• Total sales increased 10.5% to $2,201 million, while comparable store sales increased 3.9%. New and non-comparable stores contributed an incremental $151 million in sales during the quarter.
• Gross margin rate increased 20 basis points to 42.1%. Merchandise margin increased 40 basis points, which was partially offset by an increase in freight costs. Product sourcing costs, which are included in selling, general and administrative expenses (SG&A), were flat as a percentage of sales. Product sourcing costs include the costs of processing goods through our supply chain and buying costs.
• SG&A increased $62 million to $595 million. As a result of our adoption of the new Lease Accounting Standard, favorable lease costs, initially recorded as a result of purchase accounting that occurred in 2006, are now included in SG&A. In prior periods, these costs were included in depreciation and amortization.
• Adjusted SG&A, defined as SG&A less product sourcing costs and favorable lease costs, as a percentage of sales decreased 20 basis points to 22.5%. This decrease was driven by strong sales growth, resulting in leverage on occupancy and marketing expense, as well as corporate costs. Note that Adjusted SG&A excludes $2.9 million in management transition costs incurred during the fourth quarter of Fiscal 2019.
• The effective tax rate increased 200 basis points to 24.0%. The Adjusted Effective Tax Rate increased 160 basis points to 23.8%.
• Net income increased 12% to $206 million, or $3.08 per share vs. $2.70 last year, and Adjusted Net Income increased 13% to $218 million, or $3.25 per share vs. $2.83 last year. Adjusted Net Income and EPS exclude $0.04 per share for management transition costs. This increase in Adjusted Net Income was driven primarily by higher sales growth, merchandise margin improvement, and leverage on SG&A.
• Fully diluted shares outstanding amounted to 67.0 million at the end of the quarter compared with 68.3 million at the end of last year’s fourth quarter. The decrease was primarily the result of share repurchases under the Company’s share repurchase program, discussed in more detail below. From the end of the fourth quarter of Fiscal 2018 through the end of the fourth quarter of Fiscal 2019, the Company has repurchased approximately 1.7 million shares of its common stock under its share repurchase program.
• Adjusted EBITDA increased 13%, or $40 million higher than last year’s fourth quarter. Adjusted EBIT increased 14%, or $35 million above the prior year period, to $297 million. The 40 basis point increase in Adjusted EBIT as a percentage of sales was primarily driven by the same factors noted above that drove Adjusted Net Income growth. Note that Adjusted EBITDA and Adjusted EBIT exclude the impact of $2.9 million in management transition costs incurred during the fourth quarter of Fiscal 2019.

Michael O’Sullivan, CEO, stated, “We are pleased with our fourth quarter results, driven by a solid 3.9% comparable store sales increase. Overall we generated a 10.5% sales increase, which resulted in a 40 basis point increase in Adjusted EBIT margin, and a 15% increase in Adjusted EPS, ahead of both our original and recently updated guidance. In addition, our inventory management made further progress during the fourth quarter, as our comparable store inventory decreased 15%, putting us in a very opportunistic inventory position as we enter Fiscal 2020.”

GUIDANCE:

Burlington Stores sees Q1 2020 EPS of $1.29-$1.34, versus the consensus of $1.45.

Burlington Stores sees FY2020 EPS of $7.97-$8.12, versus the consensus of $8.29.

For the first quarter of Fiscal 2020 (the 13 weeks ending May 2, 2020), the Company expects:

• Total sales to increase in the range of 8% to 9%, on top of an approximately 7% increase in the first quarter of Fiscal 2019; this assumes comparable store sales to increase in the range of 1% to 2%, on top of the approximately 0% increase in the first quarter of Fiscal 2019;
• An effective tax rate of approximately 15%; and
• Adjusted EPS in the range of $1.29 to $1.34, which assumes a fully diluted share count of approximately 66.8 million, as compared to Fiscal 2019 first quarter net income per share of $1.15 and Fiscal 2019 first quarter Adjusted EPS of $1.26. This outlook excludes an expected $0.04 per share impact of management transition costs.

For Fiscal 2020 (the 52-weeks ending January 30, 2021), the Company expects:

• Total sales to increase in the range of 8% to 9%, on top of an approximately 9% increase in Fiscal 2019; this assumes comparable store sales to increase in the range of 1% to 2%, on top of the approximately 3% increase during Fiscal 2019;
• Depreciation and amortization, exclusive of favorable lease costs, to be approximately $235 million;
• Adjusted EBIT margin rate to be approximately flat versus last year;
• Net interest expense of approximately $45 million;
• An effective tax rate of approximately 21%;
• To open 54 net new stores, and invest approximately $400 million in Capital Expenditures, net of landlord allowances; and
• Adjusted EPS in the range of $7.97 to $8.12, utilizing a fully diluted share count of approximately 66.6 million, as compared to Fiscal 2019 net income per share of $6.91 and Fiscal 2019 Adjusted EPS of $7.41. This outlook excludes an expected $0.16 per share impact of management transition costs.

For earnings history and earnings-related data on Burlington Stores (BURL) click here.