Burlington Stores, Inc. Q4 FY2024 earnings call

Key Points

• Q4 Results: Comparable store sales increased 6%, driven by a strategy to elevate assortment across categories and price points, and the company's responsiveness to sudden shifts in sales trends during the fall season.
• 2024 Full-Year Progress: Total sales grew 11%, operating margin expanded by 100 basis points. New store openings: 101 net new stores in 2024. Comparable store sales grew 4% in 2024. Operating margin expansion was driven by stronger merchant margin, supply chain productivity improvements, and sales leverage on fixed costs.
• Long-Range Goals: Aim to grow total sales to ~$16 billion and operating profit to ~$1.6 billion by 2028. 2024 progress includes 11% total sales growth, 4% comp sales growth, and 100 basis points of operating margin expansion.

Total sales for the fourth quarter grew 10%, with comparable store sales increasing 6%, well above the guidance of 0% to 2%. For the full year 2024, total sales increased 11% and comparable store sales grew 4%. There is no specific breakdown of revenue contribution by product segments in the transcript.

2025 Guidance

• Total Sales: Expected to grow in the range of 6% to 8%, assuming 100 net new store openings.
• Comp Store Sales: Forecasted to be flat to 2%.
• Adjusted EBIT Margin: Expected to be flat to an increase of 30 basis points versus the prior year, driven by higher merchandise margin and productivity savings from supply chain initiatives.
• EPS: Guidance in the range of $8.70 to $9.30, an expected increase of 4% to 11%.
• CapEx: Net of landlord allowances, expected to be approximately $950 million in fiscal 2025, higher due to the purchase of distribution centers.

Risks

• Economic/Political Uncertainties: Significant economic, political, and geopolitical risks could affect consumers, creating uncertainty in sales trends.
• Weather Impact: Weather variations, such as unseasonably warm weather in fall 2024, can impact sales performance.
• Policy Changes: Tariffs, tighter immigration controls, and other policy changes could affect customers and the supply chain, introducing volatility.
• Supply Chain Uncertainties: Tariffs and supply chain disruptions related to policy changes may affect off-price merchandise availability.

Question and Answer

Q: Elaborate on sales trends in the first quarter and the comp guidance.

A: February trend was weaker than expected due to weather and timing of tax refunds, leading to a more cautious Q1 guidance with flattish comp.

Q: Explain margin contraction in the first quarter and the cadence of margin expansion through the year.

A: Q1 margin challenge due to merch margin pressure, supply chain lease renewal increases, and low sales volume; margin expected to improve later in the year, with the biggest improvement anticipated in the fourth quarter.

Q: Break down the comp trend in 2024 by customer segments.

A: Both the 'need a deal' (focused on value) and 'want a deal' (trade-down) customers contributed to the 6% comp growth, with strong performance in lower income trade areas and mid-single digit growth in moderate/higher income areas.

Q: Discuss the impact of policy changes on the business.

A: Uncertainty from policy changes is generally good for off-price, but the company needs to remain nimble; policy changes could have mixed effects on customers and the supply chain.

Q: Explain the margin expansion guidance for 2025 compared to 2024.

A: 2025 margin expansion is a more measured pace than 2024, driven by higher merchandise margin and productivity savings from supply chain initiatives, with a more cautious approach due to uncertainty.

Q: What are the implications of higher CapEx for debt levels and stock buybacks?

A: CapEx increase is manageable with modest impact on leverage ratios; share repurchases are expected to continue at levels similar to prior years.

Q: Discuss category, regional performance in Q4 and traffic/ticket drivers of comp growth.

A: Comp growth was driven by traffic and higher average transaction value, with strength in accessories, beauty, and home categories; regions were broadly based with every region comping up mid-single digits.

Q: How do weather and regional dynamics affect the business into Q1?

A: Weather in Q4, like unseasonably warm weather in November and winter storms in January, impacted sales, and similar weather patterns in Q1 can influence performance.

Q: Update on store leases acquired from bankrupt retailers.

A: Acquired 64 Bed Bath & Beyond stores in 2023 and 39 additional stores from other bankrupt retailers in late 2024, included in new store plans.

Q: View on off-price merchandise availability today.

A: Off-price merchandise availability is strong, with good vendor partnerships enabling the company to chase sales growth even from a slow start in Q4.