Burlington Stores, Inc. — Form 10-Q Summary
Reporting period: The filing covers the 13 weeks and six months ended July 29, 2023 (Q2 and first half of fiscal 2023), compared with periods ended July 30, 2022. This differs from the request metadata’s “2022 Q2.” Burlington operated 939 stores at quarter-end.
Financial performance
| Metric | Q2 FY2023 | Q2 FY2022 | First half FY2023 | First half FY2022 |
|---|---|---|---|---|
| Net sales | $2.170 billion | $1.984 billion | $4.303 billion | $3.910 billion |
| Comparable-store sales | +4% | -17% | +4% | -17% |
| Net income | $30.9 million | $12.0 million | $63.6 million | $28.1 million |
| Diluted EPS | $0.47 | $0.18 | $0.98 | $0.42 |
| Gross margin | 41.7% | 38.9% | 42.0% | 39.9% |
| Operating cash flow | — | $29.8 million | $(152.9) million |
Q2 net sales rose 9.4%; first-half sales rose 10.1%. Management attributed growth to 4% comparable-store sales gains and sales from 62 net new stores opened since the prior-year second quarter. Higher merchandise margins and lower freight costs improved gross margin. SG&A increased 13.1% in Q2 and 12.1% in the first half, with product sourcing, occupancy, store payroll and marketing costs among the drivers. Interest expense also increased, reflecting higher rates on unhedged term-loan borrowings.
Adjusted EBITDA was $140.8 million in Q2 and $298.1 million in the first half, compared with $110.6 million and $236.0 million, respectively, in the prior-year periods. These are non-GAAP measures; Burlington’s definitions exclude specified items and should be considered alongside GAAP results.
Cash, debt and liquidity
- Cash and cash equivalents were $521.0 million at July 29, down from $872.6 million at fiscal year-end. Cash, cash equivalents and restricted cash declined $358.2 million in the first half.
- First-half investing cash use was $177.7 million, including $184.8 million of cash paid for property and equipment. Financing cash use was $210.4 million, including $88.1 million for treasury shares and debt repayments.
- Total debt, including finance lease obligations and before current maturities, discounts and financing costs, was reported at $1.362 billion; balance-sheet long-term debt net of current maturities was $1.348 billion. This included $937.7 million of term loans and $397.4 million of convertible notes. No ABL borrowings were outstanding; $818.7 million was available under the ABL facility.
- The term-loan rate was 7.4% at quarter-end, versus 4.4% a year earlier. A $450 million interest-rate swap hedges part of the variable-rate exposure at 2.16% through June 2028.
- Working capital was $273.4 million. Management believes operating cash, existing cash and the ABL facility will fund expected requirements and planned capital expenditures for at least the next 12 months.
- Operating lease liabilities totaled $3.201 billion; future minimum operating-lease payments were $3.915 billion. Purchase commitments for goods not yet received were $1.301 billion.
Changes, outlook and risks
- During the first half, Burlington opened 22 stores, including five relocations, and permanently closed five. It planned 70–80 net new stores for fiscal 2023 and estimated fiscal-year capital expenditures of approximately $560 million, net of landlord allowances.
- Management’s stated priorities include leaner store inventories, chasing sales trends with opportunistic in-season purchases, merchandising investments, store expansion and expense discipline. Inventory was $1.162 billion, down from $1.267 billion a year earlier.
- The company exchanged $110.3 million principal amount of convertible notes for $133.3 million cash in the first quarter, recording a $24.6 million pretax debt-extinguishment loss. It repurchased $77.5 million of shares in the first half. On August 15, 2023, the board authorized an additional $500 million repurchase program.
- Burlington acquired 22 Bed Bath & Beyond store leases during the first half, incurring rent before those locations opened. After quarter-end, it committed to another $206.6 million for 40 additional store leases from Bed Bath & Beyond.
- No full-year sales or earnings guidance is provided in the supplied filing text. The company cautioned that inflation and pressure on its lower-income core customers, competition and margin pressure, weather, seasonality, supply and labor costs, and execution of growth plans could affect results. The second half is typically stronger due to back-to-school and holiday sales.
- The company disclosed labor-related class and collective actions and other proceedings; management stated it did not expect their final resolution to materially adversely affect results, financial position, liquidity or capital resources. Store impairment charges were $4.7 million in Q2, and future impairments may result if store projections are not met.
Key facts for investors to verify
- Confirm the intended period: the filing is for Q2 fiscal 2023, ended July 29, 2023, not Q2 2022.
- Track whether comparable-store sales gains and gross-margin improvement persist, and whether rising SG&A and sourcing costs constrain operating leverage.
- Monitor cash usage, planned capital expenditures, share repurchases and debt service alongside the company’s stated liquidity assessment.
- Assess execution and returns on planned store openings and Bed Bath & Beyond lease commitments, including rent incurred before stores open.
- Evaluate exposure to variable interest rates, the 2025 convertible-note maturity, lease obligations, purchase commitments and the disclosed legal and impairment risks.