Burlington Stores, Inc. — Form 10-Q Summary
Period clarification: The supplied filing is for the quarter ended October 30, 2021, and the nine months then ended—not 2020 Q3 as stated in the request metadata. Amounts below are in U.S. dollars; financial statement figures are in millions unless stated otherwise.
Business context and reporting period
Burlington is an off-price apparel and home retailer. It operated 832 stores in 45 states and Puerto Rico at quarter-end. During the nine-month period, it opened 93 stores, including 17 relocations, and permanently closed five stores. Fiscal 2021 ends January 29, 2022.
Results are compared with 2020, when COVID-19 store closures materially disrupted operations. For a less distorted sales comparison, management reported comparable-store sales against 2019.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Net sales | $2,299.6 | $1,664.7 | $6,703.1 | $3,472.6 |
| Gross margin as % of net sales | 41.4% | 45.0% | 42.3% | 35.3% |
| Net income (loss) | $13.6 | $8.0 | $287.2 | $(372.5) |
| Diluted EPS | $0.20 | $0.12 | $4.21 | $(5.66) |
| Adjusted EBITDA (non-GAAP) | $205.0 | $113.5 | $744.2 | $(342.8) |
| Cash from operating activities | — | $608.4 | $(116.9) |
Q3 net sales increased 38.1% year over year; nine-month sales increased 93.0%. Comparable-store sales rose 16% for Q3 and 18% for the nine months versus the corresponding 2019 periods. The 2020 comparison reflects pandemic-related store disruption.
Q3 gross margin declined as a percentage of sales, which management attributed primarily to higher freight and labor costs from industry-wide supply-chain pressures. The nine-month margin improved against 2020, primarily because 2020 included a $271.9 million aged-inventory markdown charge related to store closures.
At October 30, 2021, cash and cash equivalents were $1,185.4 million; working capital was $686.0 million. Cash, cash equivalents and restricted cash decreased $194.9 million over the nine months. Capital expenditures were $238.5 million before landlord allowances; net cash used in investing activities was $233.3 million.
Reported debt was $1,628.9 million, including finance lease obligations, with $14.2 million current maturities. There were no ABL borrowings and $541.0 million of availability under the revolving facility. The company also reported $2,906.8 million of operating lease liabilities. The balance sheet lists current assets of $2,772.1 million and current liabilities of $2,079.5 million.
Material changes versus the prior comparable period
- Q3 GAAP net income increased to $13.6 million from $8.0 million, despite an $86.4 million debt-extinguishment charge related to exchanging $160.4 million principal amount of convertible notes for $90.8 million cash and 513,991 shares.
- Nine-month results recovered from a $372.5 million net loss to $287.2 million net income, with the prior period heavily affected by store closures and inventory markdowns.
- Q3 SG&A fell to 33.0% of net sales from 38.8%, while cost of sales rose to 58.6% from 55.0%. Nine-month SG&A was 31.7% of sales versus 46.7% in 2020.
- Debt transactions included redemption of $300.0 million of 6.25% secured notes in June, refinancing and extending the term loan maturity to June 2028, and the partial convertible-note exchange in September. The nine-month income statement includes $117.8 million of debt-extinguishment losses.
- The company adopted ASU 2020-06 at the start of fiscal 2021, reducing reported convertible-note interest expense and changing diluted-share treatment.
Outlook, management commentary, risks and unusual items
- Management estimated fiscal 2021 capital expenditures of approximately $425 million, net of about $30 million in landlord allowances, including approximately $175 million for stores and $120 million for supply-chain initiatives.
- Management planned 77 net new stores in fiscal 2021, comprising approximately 101 gross openings and 24 relocations and closings. It described a long-term opportunity to operate 2,000 stores; this is an aspiration, not a near-term forecast.
- Management said operating cash, existing cash and ABL availability should fund expected needs and planned capital expenditures for at least the next 12 months, while noting there can be no assurance that cost savings would offset a sustained sales decline.
- Supply-chain disruption, freight and labor inflation were pressuring margins and could persist through the rest of fiscal 2021 and potentially into fiscal 2022. Other cited risks include COVID-19 developments, consumer spending and inflation, competition, merchandise availability, weather, labor, and the company’s debt obligations.
- Other notable commitments include $1,766.0 million of purchase commitments for goods not yet received and $3,558.4 million of future minimum operating lease payments. Management disclosed ordinary-course litigation and said it did not expect the ultimate resolution to materially adversely affect the company.
- The company repurchased $150.0 million of shares during fiscal 2021 and had $250.0 million remaining under its $400.0 million authorization. It did not anticipate cash dividends in the near term.
Most important facts for investors to verify
- Confirm the filing period: quarter ended October 30, 2021, not 2020 Q3.
- Assess sales and comparable-store trends against 2019 as well as 2020, given pandemic-distorted comparisons.
- Track freight, labor and sourcing costs and whether they continue to reduce gross margin.
- Review cash generation, inventory and working-capital movements alongside planned capital spending and store growth.
- Verify debt balances, convertible-note terms and dilution exposure, lease obligations, and the effect of further share repurchases.
- Distinguish GAAP earnings from management’s non-GAAP adjusted measures, which exclude items including debt-extinguishment losses.