Burlington Stores, Inc. — Form 10-K Summary
Period clarification: The supplied filing is the 10-K for the 52-week fiscal year ended January 30, 2021 (Fiscal 2020), not a 2019 Q4 filing. Comparisons below are primarily with Fiscal 2019, ended February 1, 2020.
Business context
Burlington is an off-price apparel and home retailer. At fiscal year-end it operated 761 stores in 45 states and Puerto Rico; more than 99% of net sales came from stores. The company closed all stores temporarily beginning March 22, 2020, and substantially all had reopened by the end of the second quarter. It also shifted its website from e-commerce sales to marketing content during Fiscal 2020.
Financial performance and liquidity
| Metric | Fiscal 2020 | Fiscal 2019 |
|---|---|---|
| Net sales | $5.752 billion | $7.261 billion |
| Net income (loss) | $(216.5) million | $465.1 million |
| Diluted EPS | $(3.28) | $6.91 |
| Gross margin rate | 38.2% | 41.8% |
| Adjusted EBITDA | $(62.7) million | $879.7 million |
| Cash from operating activities | $219.2 million | $891.7 million |
| Capital expenditures, net of landlord allowances | $232.4 million | $268.9 million |
- Sales fell 20.8%; management attributed the decline chiefly to pandemic-related closures and disruption after reopening. Full-year comparable sales were not meaningful because of extended closures. Fourth-quarter comparable sales were flat year over year.
- Gross margin contracted 3.6 percentage points, primarily due to aged-inventory markdowns. The company recorded $271.9 million of markdown reserves in the first quarter.
- Fiscal 2020 net loss included a $221.1 million income-tax benefit. The CARES Act NOL carryback produced an estimated one-time federal tax refund of $219.7 million, recorded in prepaid and other current assets.
- Cash and cash equivalents were $1.380 billion at year-end, up from $403.1 million. Working capital was $820.0 million, versus a $51.1 million deficit a year earlier. The cash increase reflected financing activity, including new notes, rather than stronger operating cash flow.
- Operating cash flow was $219.2 million; investing used $274.1 million and financing provided $1.032 billion. The $977.2 million increase in cash, cash equivalents and restricted cash was largely driven by debt issuance.
- Debt included $961.4 million principal under the term loan, $805 million face value of convertible notes and $300 million of secured notes; no ABL borrowings remained. ABL availability was $476.8 million. The balance sheet reported $1.928 billion of long-term debt, net of discounts and financing costs, plus $47.7 million of finance lease obligations.
- Operating lease liabilities totaled $2.705 billion. Contractual operating lease payments were $3.373 billion before discounting.
Material changes, outlook and risks
- In April 2020, Burlington issued $805 million of 2.25% convertible notes and its subsidiary issued $300 million of 6.25% secured notes, both due 2025. The company also borrowed and subsequently repaid $400 million from its ABL facility. Interest expense rose to $97.8 million from $50.8 million.
- Management said it expected cash from operations, existing cash and the ABL facility to fund requirements and planned capital expenditures for at least the next 12 months, while cautioning that renewed closures or weaker sales could undermine that outlook.
- Fiscal 2021 plans included approximately 75 net new stores, about $470 million of capital expenditures, and a long-term store target of 2,000. These are plans, not guaranteed results.
- Strategic priorities included leaner inventories, fresher merchandise, improved ability to chase sales trends, investment in merchandising, store expansion and expense control. Management cautioned that the Fiscal 2020 product mix—particularly stronger home-category sales—might not represent continuing trends.
- Key uncertainties include further COVID-19 disruption, consumer demand and traffic, inventory markdowns, competition and margin pressure, weather and seasonality, supply-chain interruptions, tariffs, labor costs, cybersecurity, and floating-rate debt exposure. A 1 percentage-point rate increase was estimated to add $5.2 million in annual cash interest expense after the swap hedge.
- The company settled two wage-and-hour cases for approximately $19.6 million plus employer payroll taxes; the settlement was paid in Fiscal 2020. Other employment, consumer/privacy and commercial proceedings remain, with outcomes uncertain; management did not expect their resolution to have a material adverse effect.
- The auditor issued unqualified opinions on the financial statements and internal control. The audit highlighted the judgment involved in determining timely inventory markdowns.
Important facts for investors to verify
- Confirm the intended period: this filing reports Fiscal 2020, not 2019 Q4.
- Track post-pandemic sales, comparable-store trends, gross margin recovery and the level of inventory markdowns.
- Assess cash generation apart from the large financing-driven cash increase, and monitor whether the estimated tax refund is collected.
- Review debt carrying values versus face amounts, interest costs, 2024–2025 maturities, convertible-note dilution terms and substantial lease commitments.
- Evaluate execution and funding of the Fiscal 2021 store-opening and capital-expenditure plans against realized returns and liquidity.