Burlington Stores (BURL), which made its IPO debut in October 2013, is trading 5% higher today after reporting strong Q2 (Jul) earnings this morning and announcing a new $300 mln stock buyback plan.
In case you're not familiar with BURL, some background would help. It operates a national chain of off-price retail stores (600 current locations) offering women's, men's and children's apparel and accessories, home goods, baby products and coats, principally under the name Burlington Stores.
It was known for decades as Burlington Coat Factory. The company was taken private by Bain Capital in 2006. Once acquired, Bain began a restructuring program that streamlined operations, refocused their merchandise (de-emphasizing coats and becoming much more of a general off-price merchandise company), and returned the company to growth.
Its merchandise is deeply discounted, up to 60-70% off department store prices. The company's stores are very large -- two to three times larger than its competitors' stores -- which allows BURL to feature merchandise from over 3,500 vendors, although the focus is on nationally-recognized brands. The company's two main competitors are TJ Maxx (TJX) and Ross Stores (ROST). Big Lots (BIG) is probably in the mix as well.
Turning to the JulQ results, non-GAAP EPS rose 85% YoY to $0.72 from $0.39 in the prior year period. It was way above prior guidance of $0.45-0.50. Revenue rose 8.6% year/year to $1.36 bln, which was also better than prior guidance of $1.34-1.35 bln.
Same store comps came in at +3.5%, which was above prior guidance of +2-3%. It was also up nicely from the +0.5% comp in AprQ. For Q3 (Oct), comps are expected in the +2-3% range. In terms of other guidance for Q3 (Oct), BURL expects non-GAAP EPS of $0.58-0.61, which is in-line with market expectations. Revenue is expected to grow +6.7-7.7%.
So why the big EPS upside? It seems to be driven by its overall 8.6% sales growth, along with a 140 basis point adjusted operating margin improvement. BURL says its inventories are fresh, it is well positioned for Back to School, and it has significant open-to-buy entering OctQ as opportunities remain plentiful.
On the call, BURL says its top-performing businesses were all areas of home, beauty driven by bath, cosmetics, and fragrances, missy sportswear driven by active, mens sportswear also driven by shoes, athletic shoes, and handbags.
In sum, this was a good quarter for BURL. It's clear that Burlington's strategy of repositioning itself (de-emphasizing coats and becoming much more of a general off-price merchandise company) is really paying some dividends.
The stock has been impressive over the past 18 months, up more than 100% from early 2016 although it has been weak lately, down from its May high of $104 to its current $89 level. BURL has now reported six large EPS beats in a row. It seems to be performing fairly well in a difficult retail environment where others are struggling.