Burlington Stores, Inc. — Form 10-Q Summary
Period clarification: The filing covers the three months ended May 1, 2021, not 2020 Q1 as stated in the request metadata. The comparison period ended May 2, 2020. Amounts below are in U.S. dollars.
Business context and reporting period
Burlington is an off-price retailer of apparel, footwear, accessories, home goods and other merchandise. It operated 784 stores in 45 states and Puerto Rico at May 1, 2021. Fiscal 2021 is the 52-week year ending January 29, 2022. Results for this seasonally affected quarter should not be treated as indicative of the full year.
Financial performance and liquidity
| Metric | Three months ended May 1, 2021 | Prior-year period |
|---|---|---|
| Net sales | $2,190.7 million | $798.0 million |
| Total revenue | $2,193.3 million | $801.5 million |
| Gross margin as a percentage of net sales | 43.3% | 2.0% |
| SG&A | $664.8 million; 30.3% of sales | $485.1 million; 60.8% of sales |
| Net income (loss) | $171.0 million; $2.51 diluted EPS | $(333.7) million; $(5.09) diluted EPS |
| Operating cash flow | $223.4 million | $(271.7) million |
Comparable-store sales increased 20% versus the first quarter of fiscal 2019; the company said comparison with fiscal 2020 was not meaningful because stores were closed. Cash and cash equivalents were $1,530.6 million, with an additional $6.6 million of restricted cash. Working capital was $1,002.8 million.
At May 1, 2021, total debt was $2,085.3 million, including $46.7 million of finance lease obligations; long-term debt net of current maturities was $2,081.0 million. The company had no ABL borrowings and reported $549.5 million of ABL availability. Operating lease liabilities totaled $2,741.8 million. Cash capital expenditures were $71.7 million; cash flow from investing activities was $(71.8) million.
Material changes versus the prior period
Sales rose 174.5%, and the company returned to profitability. The comparison is heavily affected by COVID-19: Burlington temporarily closed all stores effective March 22, 2020, and stores began reopening May 11, 2020. The prior-year quarter also included a $271.9 million inventory markdown reserve associated with closures and aging inventory, which depressed prior-year gross margin. The company attributed the improvement to those disruptions and its sales performance, including 20% comparable-store growth versus 2019.
SG&A increased in dollars but fell substantially as a share of sales, reflecting the sales recovery and exceptional cost-reduction actions during the prior-year closures. Interest expense increased to $19.6 million from $14.7 million, primarily because the Convertible and Secured Notes were outstanding for a full quarter in 2021.
Outlook, commentary, risks and unusual items
- Outlook: No quarterly or annual sales or earnings guidance is provided. Management said existing cash, operating cash generation and ABL availability should fund expected needs and planned capital expenditures for at least the next 12 months, while warning this depends on performance and economic conditions.
- Investment and growth plans: Fiscal 2021 capital expenditures were estimated at approximately $470 million, net of approximately $15 million of landlord allowances, including about $205 million for stores and $140 million for supply-chain initiatives. The company planned 75 net new stores for the year. It opened 26 stores, including one relocation, and permanently closed two during the quarter.
- Debt transaction after quarter-end: On May 27, 2021, Burlington announced a make-whole call for all $300 million of its 6.25% Secured Notes and expected a pretax debt-extinguishment charge of approximately $30 million in the quarter ending July 31, 2021.
- Accounting change: Early adoption of ASU 2020-06 changed the Convertible Notes accounting to debt-only, reduced the effective interest rate from 8.2% to 2.8%, and reduced first-quarter 2021 interest expense by $7.6 million. The company reported a $0.05 diluted EPS benefit from the revised conversion method.
- COVID-19 and operating risks: Management cited uncertainty from the pandemic, consumer spending and economic conditions, supply-chain and labor constraints, competition and margin pressure, weather, inflation, and the company’s substantial indebtedness. It noted that estimates remain more variable because of the pandemic.
- Commitments and contingencies: Purchase commitments for goods not yet received were $1,576.6 million. The company disclosed various employment, consumer, product and other legal matters and said it did not expect their resolution to materially adversely affect its financial position, results, liquidity or capital resources.
- Capital returns: The share repurchase program remained suspended; no shares were repurchased under the program during the quarter. The company did not anticipate near-term cash dividends.
Important facts for investors to verify
- Assess the sales and earnings recovery against pre-pandemic periods, noting that the reported year-over-year comparison is distorted by prior-year store closures and markdowns.
- Monitor comparable-store sales, gross margin, inventory levels and markdowns as supply and consumer conditions change.
- Review the $300 million Secured Notes redemption, the expected approximately $30 million extinguishment charge, and the company’s remaining debt and liquidity after the transaction.
- Track planned capital expenditures, store openings and supply-chain investment against cash generation and ABL availability.
- Consider lease liabilities, purchase commitments and COVID-19-related operating risks alongside reported debt when evaluating financial flexibility.