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Burlington Stores, Inc. Reports Third Quarter 2022 Earnings

November 22, 2022 6:45 AM

BURLINGTON, N.J., Nov. 22, 2022 (GLOBE NEWSWIRE) -- Burlington Stores, Inc. (NYSE: BURL), a nationally recognized off-price retailer of high-quality, branded apparel, footwear, accessories, and merchandise for the home at everyday low prices, today announced its results for the third quarter ended October 29, 2022.

Michael O’Sullivan, CEO, stated, “In Q3 we achieved sales and earnings that were within our guidance range, but we are not happy with this performance. As we said on our August earnings call, as an off-price retailer we should be able to perform better in this environment despite the significant macro headwinds. Recent results from other off-price retailers reinforce this view.”

Mr. O’Sullivan continued, “As we described in August, the consumer’s frame of reference for value shifted significantly in 2022, but we did not respond aggressively enough to this shift. So, in Q3 we took significant steps to improve the value and mix of our assortment. These actions have driven an improvement in our trend from mid-October through November. We are encouraged by this but given the external risks we are maintaining our guidance for Q4.”

Looking further ahead, Mr. O’Sullivan said, “While we acknowledge that there are risks and uncertainties, we think the outlook for 2023 is very positive. We anticipate that the economic and competitive environment could set up very well for off-price. We also recognize that we will be lapping our own execution mistakes and under-performance from 2022. Based on these factors we believe that we can start to drive significant sales, margin, and earnings recovery next year.”

Fiscal 2022 Third Quarter Operating Results (for the 13-week period ended October 29, 2022, compared with the 13-week period ended October 30, 2021)

First Nine Months Fiscal 2022 Results

Inventory

Liquidity and Debt

Common Stock Repurchases

Outlook* For the full Fiscal Year 2022 (the 52-weeks ending January 28, 2023), the Company now expects:

For the fourth quarter of Fiscal 2022 (the 13-weeks ending January 28, 2023), the Company expects:

*Three year geometric comparable store sales stack is defined as a stacked comparable sales growth rate that accounts for the compounding of comparable store sales from Fiscal 2019 to Fiscal 2022. It is calculated for each Fiscal 2022 quarter and full year Fiscal 2022 as follows: (1 + QTD 2021 comparable store sales growth) * (1 + QTD 2022 comparable store sales growth) - 1, and (1 + FY 2021 comparable store sales growth) * (1 + FY 2022 comparable store sales growth) - 1. Comparisons for Fiscal 2021 periods are made versus the same periods in Fiscal 2019.

The Company has not presented a quantitative reconciliation of the forward-looking non-GAAP financial measures set out above to their most comparable GAAP financial measures because it would require the Company to create estimated ranges on a GAAP basis, which would entail unreasonable effort. Adjustments required to reconcile forward-looking non-GAAP measures cannot be predicted with reasonable certainty but may include, among others, costs related to debt amendments, loss on extinguishment of debt, and impairment charges, as well as the tax effect of such items. Some or all of those adjustments could be significant.

Note Regarding Non-GAAP Financial Measures

The foregoing discussion of the Company’s operating results includes references to Adjusted SG&A, Adjusted EBITDA, Adjusted Net Income, Adjusted Earnings per Share (or Adjusted EPS), Adjusted EBIT (or Operating Margin), and Adjusted Effective Tax Rate. The Company believes these supplemental measures are useful in evaluating the performance of our business and provide greater transparency into our results of operations. In particular, we believe that excluding certain items that may vary substantially in frequency and magnitude from what we consider to be our core operating results are useful supplemental measures that assist investors and management in evaluating our ability to generate earnings and leverage sales, and to more readily compare core operating results between past and future periods. These non-GAAP financial measures are defined and reconciled to the most comparable GAAP measures later in this document.

Third Quarter 2022 Conference Call

A live webcast of the conference call will be available on the investor relations page of the company's website at www.burlingtoninvestors.com.

For those unable to participate in the conference call, a replay will be available after the conclusion of the call on November 22, 2022 beginning at 12:30 p.m. ET through November 29, 2022 at 11:59 p.m. ET. The U.S. toll-free replay dial-in number is 1-800-770-2030 and the international replay dial-in number is 1-609-800-9909. The replay passcode is 4211444.

About Burlington Stores, Inc.

Burlington Stores, Inc., headquartered in New Jersey, is a nationally recognized off-price retailer with Fiscal 2021 net sales of $9.3 billion. The Company is a Fortune 500 company and its common stock is traded on the New York Stock Exchange under the ticker symbol “BURL.” The Company operated 893 stores as of the end of the third quarter of Fiscal 2022, in 46 states and Puerto Rico, principally under the name Burlington Stores. The Company’s stores offer an extensive selection of in-season, fashion-focused merchandise at up to 60% off other retailers' prices, including women’s ready-to-wear apparel, menswear, youth apparel, baby, beauty, footwear, accessories, home, toys, gifts and coats.

For more information about the Company, visit www.burlington.com.

Investor Relations Contacts: David J. Glick Daniel Delrosario 855-973-8445 [email protected]

Allison Malkin ICR, Inc. 203-682-8225

Safe Harbor for Forward-Looking and Cautionary Statements This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact included in this release, including those about our expected sales trend, our liquidity position, inventory plans, and the economic environment, as well as statements describing our outlook for future periods, are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. We do not undertake to publicly update or revise our forward-looking statements, except as required by law, even if experience or future changes make it clear that any projected results expressed or implied in such statements will not be realized. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements. All forward-looking statements are subject to risks and uncertainties that may cause actual events or results to differ materially from those we expected, including the impact of the COVID-19 pandemic and actions taken to slow its spread and the related impacts on economic activity, financial markets, labor markets and the global supply chain; general economic conditions, including inflation, and the related impact on consumer confidence and spending; competitive factors, including pricing and promotional activities of major competitors and an increase in competition within the markets in which we compete; weather patterns, including changes in year-over-year temperatures; the reduction in traffic to, or the closing of, the other destination retailers in the shopping areas where our stores are located; changing consumer preferences and demand; industry trends, including changes in buying, inventory and other business practices; natural and man-made disasters, including fire, snow and ice storms, flood, hail, hurricanes and earthquakes; our ability to successfully implement one or more of our strategic initiatives and growth plans; the availability, selection and purchasing of attractive merchandise on favorable terms; the availability of desirable store locations on suitable terms; industry trends, including changes in buying, inventory and other business practices; terrorist attacks, particularly attacks on or within markets in which we operate; our ability to attract, train and retain quality employees and temporary personnel in appropriate numbers; our ability to control costs and expenses; the solvency of parties with whom we do business and their willingness to perform their obligations to us; import risks, including tax and trade policies, tariffs and government regulations; our dependence on vendors for our merchandise; domestic and international events affecting the delivery of merchandise to our stores; unforeseen cyber-related problems or attacks; regulatory and tax changes; issues with merchandise safety and shrinkage; any unforeseen material loss or casualty or the existence of adverse litigation; the impact of current and future laws and the interpretation of such laws; our substantial level of indebtedness and related debt-service obligations; consequences of the failure to comply with covenants in our debt agreements; the availability of adequate financing; and each of the factors that may be described from time to time in our filings with the U.S. Securities and Exchange Commission. For each of these factors, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended.

BURLINGTON STORES, INC.CONDENSED CONSOLIDATED STATEMENTS OF INCOME(unaudited) (All amounts in thousands, except per share data)

Three Months Ended Nine Months Ended
October 29, October 30, October 29, October 30,
2022 2021 2022 2021
REVENUES:
Net sales$2,035,927 $2,299,610 $5,945,459 $6,703,089
Other revenue 4,760 4,431 12,862 10,159
Total revenue 2,040,687 2,304,041 5,958,321 6,713,248
COSTS AND EXPENSES:
Cost of sales 1,198,126 1,347,559 3,546,340 3,869,432
Selling, general and administrative expenses 726,926 759,785 2,092,756 2,126,904
Costs related to debt issuances and amendments — 89 — 3,419
Depreciation and amortization 67,634 64,663 201,908 183,087
Impairment charges - long-lived assets 10,599 1,488 17,556 3,235
Other income - net (2,828) (3,055) (18,833) (10,267)
Loss on extinguishment of debt — 86,362 14,657 117,756
Interest expense 17,412 15,609 47,454 52,710
Total costs and expenses 2,017,869 2,272,500 5,901,838 6,346,276
Income before income tax expense 22,818 31,541 56,483 366,972
Income tax expense 6,035 17,922 11,560 79,769
Net income$16,783 $13,619 $44,923 $287,203
Diluted net income per common share$0.26 $0.20 $0.68 $4.21
Weighted average common shares - diluted 65,504 68,205 66,058 68,228

BURLINGTON STORES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (All amounts in thousands)

October 29, January 29, October 30,
2022 2022 2021
ASSETS
Current assets:
Cash and cash equivalents$428,583 $1,091,091 $1,185,383
Restricted cash and cash equivalents 6,582 6,582 6,582
Accounts receivable—net 80,641 54,089 90,705
Merchandise inventories 1,445,087 1,021,009 1,059,749
Assets held for disposal 7,054 4,358 4,358
Prepaid and other current assets 131,834 370,515 425,288
Total current assets 2,099,781 2,547,644 2,772,065
Property and equipment—net 1,666,523 1,552,237 1,499,780
Operating lease assets 2,951,614 2,638,473 2,653,776
Goodwill and intangible assets—net 285,064 285,064 285,064
Deferred tax assets 3,643 3,959 4,119
Other assets 94,885 62,136 63,023
Total assets$7,101,510 $7,089,513 $7,277,827
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$953,680 $1,080,802 $1,174,252
Current operating lease liabilities 391,056 358,793 346,167
Other current liabilities 520,145 493,695 544,852
Current maturities of long term debt 13,528 14,357 14,224
Total current liabilities 1,878,409 1,947,647 2,079,495
Long term debt 1,464,563 1,541,102 1,614,645
Long term operating lease liabilities 2,828,574 2,539,420 2,560,663
Other liabilities 68,687 80,904 94,507
Deferred tax liabilities 222,549 220,023 211,710
Stockholders' equity 638,728 760,417 716,807
Total liabilities and stockholders' equity$7,101,510 $7,089,513 $7,277,827

BURLINGTON STORES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (All amounts in thousands)

Nine Months Ended
October 29, October 30,
2022 2021
OPERATING ACTIVITIES
Net income$44,923 $287,203
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 201,908 183,087
Deferred income taxes (12,339) 46,725
Loss on extinguishment of debt 14,657 117,756
Non-cash stock compensation expense 51,195 53,356
Non-cash lease expense 674 (6,997)
Cash received from landlord allowances 9,799 24,552
Changes in assets and liabilities:
Accounts receivable (26,801) (27,223)
Merchandise inventories (424,078) (318,961)
Accounts payable (133,305) 307,684
Other current assets and liabilities 258,843 (79,855)
Long term assets and liabilities (1,135) 1,332
Other operating activities 25,236 19,708
Net cash provided by operating activities 9,577 608,367
INVESTING ACTIVITIES
Cash paid for property and equipment (338,979) (238,468)
Lease acquisition costs (3,515) (559)
Proceeds from sale of property and equipment and assets held for sale 23,383 5,746
Net cash (used in) investing activities (319,111) (233,281)
FINANCING ACTIVITIES
Proceeds from long term debt—Term B-6 Loans — 956,608
Principal payments on long term debt—Term B-5 Loans — (961,415)
Principal payment on long term debt—Convertible Notes (78,236) (92,289)
Principal payments on long term debt—Secured Notes — (323,905)
Purchase of treasury shares (265,344) (166,473)
Other financing activities (9,394) 17,495
Net cash (used in) financing activities (352,974) (569,979)
(Decrease) in cash, cash equivalents, restricted cash and restricted cash equivalents (662,508) (194,893)
Cash, cash equivalents, restricted cash and restricted cash equivalents at beginning of period 1,097,673 1,386,858
Cash, cash equivalents, restricted cash and restricted cash equivalents at end of period$435,165 $1,191,965

Reconciliation of Non-GAAP Financial Measures(Unaudited)(Amounts in thousands, except per share data)

The following tables calculate the Company’s Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBIT, Adjusted SG&A and Adjusted Effective Tax Rate, all of which are considered non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with GAAP.

Adjusted Net Income is defined as net income, exclusive of the following items, if applicable: (i) net favorable lease costs; (ii) costs related to debt issuances and amendments; (iii) loss on extinguishment of debt; (iv) impairment charges; (v) amounts related to certain litigation matters; and (vi) other unusual, non-recurring or extraordinary expenses, losses, charges or gains, all of which are tax effected to arrive at Adjusted Net Income.

Adjusted EPS is defined as Adjusted Net Income divided by the diluted weighted average shares outstanding, as defined in the table below.

Adjusted EBITDA is defined as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) costs related to debt issuances and amendments; (iv) loss on extinguishment of debt; (v) income tax expense; (vi) depreciation and amortization; (vii) impairment charges; (viii) amounts related to certain litigation matters; and (ix) other unusual, non-recurring or extraordinary expenses, losses, charges or gains.

Adjusted EBIT (or Adjusted Operating Margin) is defined as net income, exclusive of the following items, if applicable: (i) interest expense; (ii) interest income; (iii) costs related to debt issuances and amendments; (iv) loss on extinguishment of debt; (v) income tax expense; (vi) impairment charges; (vii) net favorable lease costs; (viii) amounts related to certain litigation matters; and (ix) other unusual, non-recurring or extraordinary expenses, losses, charges or gains.

Adjusted SG&A is defined as SG&A less product sourcing costs, favorable lease costs and amounts related to certain litigation matters.

Adjusted Effective Tax Rate is defined as the GAAP effective tax rate less the tax effect of the reconciling items to arrive at Adjusted Net Income (footnote (e) in the table below).

The Company presents Adjusted Net Income, Adjusted EPS, Adjusted EBITDA, Adjusted EBIT, Adjusted SG&A and Adjusted Effective Tax Rate, because it believes they are useful supplemental measures in evaluating the performance of the Company’s business and provide greater transparency into the results of operations. In particular, the Company believes that excluding certain items that may vary substantially in frequency and magnitude from what the Company considers to be its core operating results are useful supplemental measures that assist investors and management in evaluating the Company’s ability to generate earnings and leverage sales, and to more readily compare core operating results between past and future periods.

The Company believes that these non-GAAP measures provide investors helpful information with respect to the Company’s operations and financial condition. Other companies in the retail industry may calculate these non-GAAP measures differently such that the Company’s calculation may not be directly comparable.

The following table shows the Company’s reconciliation of net income to Adjusted Net Income and Adjusted EPS for the periods indicated:

(unaudited)
(in thousands, except per share data)
Three Months Ended Nine Months Ended
October 29, October 30, October 29, October 30,
2022 2021 2022 2021
Reconciliation of net income to Adjusted Net Income:
Net income$16,783 $13,619 $44,923 $287,203
Net favorable lease costs (a) 4,791 5,275 14,262 17,188
Costs related to debt issuances and amendments (b) — 89 — 3,419
Loss on extinguishment of debt (c) — 86,362 14,657 117,756
Impairment charges - long-lived assets 10,599 1,488 17,556 3,235
Litigation matters (d) — — 10,500 —
Tax effect (e) (4,148) (13,891) (14,867) (26,835)
Adjusted Net Income$28,025 $92,942 $87,031 $401,966
Diluted weighted average shares outstanding (f) 65,504 68,205 66,058 68,228
Adjusted Earnings per Share$0.43 $1.36 $1.32 $5.89

The following table shows the Company’s reconciliation of net income to Adjusted EBITDA for the periods indicated:

(unaudited)
(in thousands)
Three Months Ended Nine Months Ended
October 29, October 30, October 29, October 30,
2022 2021 2022 2021
Reconciliation of net income to Adjusted EBITDA:
Net income$16,783 $13,619 $44,923 $287,203
Interest expense 17,412 15,609 47,454 52,710
Interest income (658) (38) (4,242) (156)
Loss on extinguishment of debt (c) — 86,362 14,657 117,756
Costs related to debt issuances and amendments (b) — 89 — 3,419
Litigation matters (d) — — 10,500 —
Depreciation and amortization (g) 72,425 69,938 216,170 200,275
Impairment charges - long-lived assets 10,599 1,488 17,556 3,235
Income tax expense 6,035 17,922 11,560 79,769
Adjusted EBITDA$122,596 $204,989 $358,578 $744,211

The following table shows the Company’s reconciliation of net income to Adjusted EBIT for the periods indicated:

(unaudited)
(in thousands)
Three Months Ended Nine Months Ended
October 29, October 30, October 29, October 30,
2022 2021 2022 2021
Reconciliation of net income to Adjusted EBIT:
Net income$16,783 $13,619 $44,923 $287,203
Interest expense 17,412 15,609 47,454 52,710
Interest income (658) (38) (4,242) (156)
Loss on extinguishment of debt (c) — 86,362 14,657 117,756
Costs related to debt issuances and amendments (b) — 89 — 3,419
Net favorable lease costs (a) 4,791 5,275 14,262 17,188
Impairment charges - long-lived assets 10,599 1,488 17,556 3,235
Litigation matters (d) — — 10,500 —
Income tax expense 6,035 17,922 11,560 79,769
Adjusted EBIT$54,962 $140,326 $156,670 $561,124

The following table shows the Company’s reconciliation of SG&A to Adjusted SG&A for the periods indicated:

(unaudited)
(in thousands)
Three Months EndedNine Months Ended
October 29, October 30, October 29, October 30,
Reconciliation of SG&A to Adjusted SG&A:2022 2021 2022 2021
SG&A$726,926 759,785 $2,092,756 $2,126,904
Net favorable lease costs (a) (4,791) (5,275) (14,262) (17,188)
Product sourcing costs (177,910) (172,748) (491,880) (459,140)
Litigation matters (d) — — (10,500) —
Adjusted SG&A$544,225 $581,762 $1,576,114 $1,650,576

The following table shows the reconciliation of the Company’s effective tax rates on a GAAP basis to the Adjusted Effective Tax Rates for the periods indicated:

(unaudited)
Three Months EndedNine Months Ended
October 29, October 30, October 29, October 30,
2022 2021 2022 2021
Effective tax rate on a GAAP basis 26.4% 56.8% 20.5% 21.7%
Adjustments to arrive at Adjusted Effective Tax Rate 0.3 (31.3) 2.8 (0.7)
Adjusted Effective Tax Rate 26.7% 25.5% 23.3% 21.0%

The following table shows the Company’s reconciliation of net income to Adjusted Net Income for the prior period Adjusted EPS amounts used in this press release for the periods indicated:

(unaudited)
(in thousands, except per share data)
Three Months Ended Twelve Months Ended
January 29, 2022 January 29, 2022
Reconciliation of net income to Adjusted Net Income:
Net income$121,636 $408,839
Net favorable lease costs (a) 4,726 21,914
Costs related to debt amendments (b) — 3,419
Loss on extinguishment of debt (c) 38,264 156,020
Impairment charges 4,514 7,748
Tax effect (e) 2,093 (24,741)
Adjusted Net Income 171,233 573,199
Diluted weighted average shares outstanding (f) 67,626 68,126
Adjusted Earnings per Share$2.53 $8.41

(a) Net favorable lease costs represent non-cash expense associated with favorable and unfavorable leases that were recorded as a result of purchase accounting related to the April 13, 2006 Bain Capital acquisition of Burlington Coat Factory Warehouse Corporation (the Merger Transaction). These expenses are recorded in the line item “Selling, general and administrative expenses” in our Condensed Consolidated Statements of Income.(b) Represents certain costs incurred to execute refinancing the Term Loan Facility.(c) Fiscal 2022 amounts relate to the partial repurchases of the Convertible Notes. Fiscal 2021 amounts relate to the partial repurchase of the Convertible Notes, the redemption of the Secured Notes, as well as the refinancing of the Term Loan Facility.(d) Represents amounts charged for certain litigation matters.(e) Tax effect is calculated based on the effective tax rates (before discrete items) for the respective periods, adjusted for the tax effect for the impact of items (a) through (d).(f) Diluted weighted average shares outstanding starts with basic shares outstanding and adds back any potentially dilutive securities outstanding during the period.(g) Includes $4.8 million and $14.3 million of favorable lease cost included in the line item “Selling, general and administrative expenses” in our Condensed Consolidated Statements of Income for the three and nine months ended October 29, 2022 and $5.3 million and $17.2 million for the three and nine months ended October 30, 2021, respectively. Net favorable lease cost represents the non-cash expense associated with favorable and unfavorable leases that were recorded as a result of the Merger Transaction.

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Source: Burlington Coat Factory Warehouse Corporation

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