Burlington Stores, Inc. — Form 10-Q Summary
Period clarification: The request metadata says 2014 Q2, but the supplied filing is for the quarter ended August 1, 2015, with comparisons to the quarter ended August 2, 2014. Amounts below are in millions except per-share data and percentages.
Business context and reporting period
Burlington operated 546 stores, including an internet store, in 45 states and Puerto Rico. The retailer sells branded apparel, footwear, accessories, home goods and other merchandise. Results cover the second quarter and first six months of fiscal 2015; the company cautions that its seasonal interim results are not necessarily indicative of full-year results.
Financial performance
| Metric | Three months ended Aug. 1, 2015 | Six months ended Aug. 1, 2015 |
|---|---|---|
| Net sales | $1,144.2; up 9.6% | $2,327.3; up 7.2% |
| Total revenue | $1,151.6 | $2,342.5 |
| Comparable-store sales | Up 5.6% | Up 3.1% |
| Gross margin as % of net sales | 39.2%, up about 100 bps | 39.5%, up about 140 bps |
| SG&A as % of net sales | 33.4%, down about 10 bps | 32.6%, up about 50 bps |
| Net income (loss) | $10.9, versus $(6.5) | $36.6, versus $5.3 |
| Diluted EPS | $0.14, versus $(0.09) | $0.48, versus $0.07 |
| Interest expense | $14.6, down from $25.5 | $29.4, down from $52.1 |
| Adjusted EBITDA (non-GAAP) | $75.4, versus $58.1 | $176.8, versus $150.4 |
| Adjusted net income (non-GAAP) | $14.9, versus $(0.9) | $46.1, versus $17.7 |
Management attributed improved profit primarily to stronger gross margin and lower interest expense, partly offset by higher SG&A and taxes. Lower markdowns drove gross-margin improvement; sourcing costs increased about 50 basis points in the quarter and 60 basis points for the half. Adjusted measures exclude specified items and should not be treated as substitutes for GAAP results.
Cash flow, debt and liquidity
- First-half operating cash flow was a use of $0.7, compared with $51.6 provided in the prior-year period. Investing used $81.8, primarily for capital expenditures.
- Financing provided $84.4, including $150.4 of net ABL borrowings. Cash and cash equivalents rose $1.9 to $27.2; restricted cash was $27.8.
- Total debt was $1,351.3, comprising $1,112.2 under the term loan, $213.7 drawn on the ABL facility and $25.4 of capital leases. The term loan rate was 4.25%. The company prepaid $50.0 of term debt in May.
- The $600.0 ABL facility had $329.6 available and $213.7 outstanding at period end. Working capital, excluding restricted cash, was $138.8.
- Merchandise inventory was $802.3, up from $711.5 a year earlier. Management cited pack-and-hold inventory and new stores; comparable-store inventory was down about 7% year over year and second-quarter comparable-store turnover improved about 13%.
Outlook, commentary and risks
- Management expected 25 net new stores in fiscal 2015; five opened and one closed in the first half. Estimated fiscal-year capital expenditures were $155–$160, net of about $35 in landlord allowances.
- Management said cash from operations, existing cash and the ABL facility should fund expected needs and planned capital spending for at least the next 12 months, while noting there is no assurance savings could offset weaker sales.
- The company did not provide specific earnings or sales guidance in the supplied filing. It cited consumer spending and economic conditions, competition and margin pressure, weather and seasonality, merchandise sourcing and delivery, substantial indebtedness, floating-rate exposure and litigation as risks.
- Interest-rate caps covered $800.0 of variable-rate debt at a 1.0% cap through May 2019. The filing estimates a one-percentage-point rate increase would add about $5.3 annually to cash interest expense at period-end debt levels.
- A California Song-Beverly Credit Card Act case had a finding of liability at trial. The company’s motion seeking reversal remained pending; any penalty above the accrued amount of $14.7 could be material, and the company could not estimate the additional loss range.
- The company authorized a $200.0 share-repurchase program through June 2017 and repurchased $25.4 during the second quarter; $174.6 remained authorized. It said it did not anticipate cash dividends in the near term.
Important facts for investors to verify
- Confirm the intended reporting period: the filing is fiscal Q2 2015, not 2014.
- Track whether sales momentum and gross-margin gains persist, especially alongside higher sourcing costs and first-half SG&A deleverage.
- Assess operating cash conversion, seasonal inventory and reliance on ABL borrowings to fund working capital, debt prepayment and repurchases.
- Review floating-rate debt exposure, available revolver capacity, and the company’s ability to meet debt service and planned capital spending.
- Monitor developments and potential penalties in the California litigation; the filing states the additional exposure is not estimable and could be material.