Burlington Stores may be the smallest of the major off-price retailers, but it managed to post a stronger-than-expected fourth quarter comparable-sales gain of 6 percent.
“The outlook for 2025 is very uncertain” and “this is the kind of environment where the off-price model is at its best,” Burlington’s CEO Michael O’Sullivan said in a statement.
In the company conference call on Thursday, the CEO attributed its fourth-quarter success to an elevated assortment that included a “higher mix of well-known national brands.”
Jefferies retail analyst Corey Tarlowe said Wall Street was expecting comparable sales to be up 2.4 percent.
“In other categories or price points, we elevated the assortment in other ways, perhaps through higher quality or a higher weight of fabric, more more up-to-date fashion, or more embellishment,” he explained. “Depending on the category or price point, these are all characteristics that the customer uses to assess value.”
O’Sullivan also noted that the company also pruned items from its assortment mix as well, all within the framework of its good, better, best strategy. And while the off-pricer worked on the elevation strategy throughout last year, “it was most evident and powerful in Q4.”
He also said another driver in the quarter was the retailer’s ability to be nimble and responsive to trends in the quarter. While it had a growth through the summer and back-to-school, warm weather from mid-September that persisted until mid-November hurt sales of outerwear, a key fall category for the off-pricer.
“We chased the trend in back-to-school categories in the summer, then pulled back very hard on cold weather businesses from mid-September onwards, and then chased holiday businesses in late November and December,” O’Sullivan said. “This nimble and rapid execution is the essence of off-price.”
Given sales trends and that Burlington is just in the first year of a five-year plan, O’Sullivan said the company is encouraged by its “initial progress” toward a goal of achieving a longer-range financial objective of total sales reaching $16 billion. That goal will be helped by three major drivers that include new store openings, comp store sales growth and operating margin expansion.
The CEO said the company opened 101 net new stores after accounting for relocations and the closure of less productive stores. It expects to open 100 net new stores in 2025 and in 2026.
While O’Sullivan said the company is “very optimistic about our business over the next two to three years,” it is the short-term outlook that remains uncertain. He said the outlook for 2025 is also “very uncertain” due to economic, political and geopolitical risks that could impact consumers.
“Rather than trying to predict what is going to happen, our approach is to manage our business conservatively and then be ready to pull back or to chase the sales trend if it is stronger,” O’Sullivan said. “This approach served us well in 2024, and we hope for the same in 2025.”
Like some other retailers, O’Sullivan said Burlington also saw a weaker start to February than planned or expected, particularly in the Midwest and Northeast. He noted that unfavorable weather, as well as the timing of tax refunds, could have had an impact on sales.
He also noted two major customer segments, Burlington’s core lower income customer who needs-a-deal and the trade-down shopper who wants-a-deal. “To achieve a 6 percent comp store sales growth in Q4, we had to deliver great value to both of those important segments of customers, and that’s what we did,” O’Sullivan said.
Kristin Wolfe, Burlington’s executive vice president and CFO, said the company’s balance sheet strength gives it the capability to own rather than lease one of its most productive distribution centers (DC). She said now that there’s less leverage on the balance sheet, the company in the fourth quarter exercised the purchase option on its 2 million square foot DC in Savannah, Georgia, which is on target to open in 2026.
“Given the progress we have made during the construction process, we exercised this purchase option in January, a few months earlier than originally planned,” Wolfe said.
Wolfe spoke about the strategic rationale for owning the DC during its November third quarter conference call, noting that its vision for future DC capacity is one that’s designed to better support is off-price model, which includes a high degree of automation. Wolfe said on Thursday that ownership gives Burlington greater control over the design of the building, as well as leverage its capital investment over time and avoid rent increases at each lease renewal.
For the three months ended Feb. 1, net income jumped 14.6 percent to $260.8 million, or $4.02 a diluted share, from $227.5 million, or $3.53, in the same year-ago quarter. On an adjusted basis, earnings per share (EPS) was $4.13. Total revenue increased 4.8 percent to $3.28 billion from $3.13 billion, which also included a net sales gain of 4.8 percent to $3.27 billion from $3.12 billion. Comparable sales rose 6 percent in the quarter.
For the year, net income spiked 48.3 percent to $503.6 million, or $7.80 a diluted share, from $339.6 million, or $5.23, in 2023. Total revenue rose 9.3 percent to $10.63 billion from $9.73 billion, which also included a net sales gain of 9.3 percent to $10.62 billion from $9.71 billion.
For the first quarter ending May 3, 2025, Burlington guided adjusted EPS in the range of $1.30 to $1.45, on a forecasted sales increase in the range of 5 percent to 7 percent. For Fiscal Year 2025 ending Jan. 31, 2026, the off-pricer said adjusted EPS is expected in the range of $8.70 to $9.30, with total sales forecasted to increase between 6 percent and 8 percent.
