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Burlington Stores Inc. had a very good second quarter.
“Our well-ahead of plan sales growth plus healthy margin expansion drove very strong earnings growth in the second quarter,” Burlington’s CEO Michael B. O’Sullivan told analysts Thursday during a company conference call. He said new stores were the key driver of growth in the quarter.
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He also said the company is on track to open 100 net new stores for the year. Burlington opened 36 net new stores for the quarter, ending with 1,057 locations. On average, new stores typically hit $7 million in sales in their first full year.
“I am pleased to say that our new stores are running ahead of this benchmark,” O’Sullivan said, adding that the company continues to see “very strong” performance in full-price selling. “Our merchants are focused on offering really sharp value out of the gate at the initial ticketed price. This is driving faster turns and lower markdowns. This means that there is less inventory making it to the clearance rack,” he said. Both the faster turns and lower number of markdowns booster the off-pricer’s gross margin for the quarter. Also helping with profitability in the quarter was Burlington’s faster-than-expected progress on its supply chain efficiency initiatives.
O’Sullivan also noted that Burlington has made progress on a number of changes and improvements to its business in merchandising and operations. In addition, helping the quarter’s results was the external retail backdrop, which the CEO described as “more favorable.”
He also said that while inflation has moderated, which helped lower-income shoppers, “economic pressure and uncertainty has spread and broadened well beyond” just the lower income shopping cohort. The CEO said the now greater focus on value across demographic groups and income levels is what has helped Burlington, and which provides grounds for optimism for the back half of the year.
For the three months ended Aug. 3, net income more than doubled to $73.8 million, or $1.15 a diluted share, from $30.9 million, or 47 cents, a year ago. Total revenue rose 13.4 percent to $2.47 billion from $2.17 billion, which included a 13.4 percent increase in net sales to $2.46 billion from $2.17 billion. Comparable store sales were up 5 percent. On and adjusted basis, diluted earnings per share (EPS) were $1.24.
Wall Street was expecting adjusted diluted EPS of 95 cents, on a revenue estimate of $2.41 billion.